Government proposals to limit and regulate employer non-disclosure agreements

The UK Government has issued new proposals and is consulting on changes to ensure that employers use confidentiality and non-disclosure clauses only where legitimate and do not unduly constrain or deter individuals from raising whistleblowing concerns or reporting issues to the police.

Organisations will need to consider very carefully contractual arrangements and terms adopted in settlement agreements and employment contracts, as well as the circumstances in which confidentiality terms are used in future, if the proposals are adopted.

The consultation can be found here.

The consultation closes on the 29 April 2019. We can expect new legislation and guidance to follow most likely in October or April next year, given early adoption may well be the objective.

What agreements and terms are under scrutiny?

Confidentiality clauses in settlement agreements are the principle concern but the Government is also looking to address confidentiality clauses in employment contracts; the approach in terms of governance and challenge to enforceability will differ.

Confidentiality clauses in contracts of employment, section 1 statements and NDAs (for example to cover special projects, research or collaboration agreements and joint ventures, which an employee may be party to) are included. However, commercial agreements, such as shareholder agreements, are likely to fall outside the scope of any new provisions.

Limits and additional requirements

Where such clauses appear in employment contracts, an employer may in future be required to set out clearly what is covered and explain the limits of the confidentiality clause. It is proposed that an employer makes clear what is not prevented from disclosure such as whistleblowing, reporting a criminal offence or the employee complying with other statutory obligations. The suggestion is that a separate statement of particulars, summarising these parameters, will have to be provided alongside the contract of employment or NDA.

Confidentiality terms contained in settlement agreements should, in the Government’s view, be subject to more stringent conditions and constraints. These too will need to be accompanied by a clear statement which highlights those disclosures that are not prohibited and the independent adviser to the employee/individual will also be required to ensure they have specifically advised on the confidentiality clause and its limits. One assumes this confirmation will in future be added to the adviser’s certificate or sign off.

Enforcement or challenging such clauses

Enforcement may be different for contractual provisions and settlement agreements.

In settlement agreements, confidentiality clauses which fail to meet the new limitations will be void in their entirety (but not the agreement as a whole). The organisation could not sue for breach of  contract or to enforce/restrain the individual. The view here is that organisations will ensure compliance in light of this risk, in order to protect their reputation.

Where the confidential term is contained in an employment contract, rather than making non-compliant provisions void (because of the wider commercial considerations for example, the impact on trade secrets or third-party interests in a joint venture arrangement) an employment tribunal will have the power to consider any failure and declare it void.

What next?

It will be important to ensure these proposals are drafted in clear terms. In due course, and once the final form of these new requirements become clear, there will be a need to revisit any standard wording on confidentiality contained in settlement agreements, contracts and other employment documentation.

Even before this new regime comes into force however, employers should be more circumspect with confidentiality clauses and make clear they do not extend to whistleblowing and criminal matters or disclosure to the police and other authorities and contain very clear carve outs in this regard.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.