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Preventing the misuse of confidentiality clauses

Confidentiality clauses are often included in settlement agreements between employers and employees to prevent the disclosure of sensitive information. Although they can serve a useful and legitimate purpose for both parties, it has been in the spotlight recently that they have also been used inappropriately by some employers to cover up incidents of sexual harassment and discrimination.

Consultation

Research and inquiries carried out into the use of confidentiality clauses to cover up workplace sexual harassment and discrimination by bodies such as the Women Equalities Select Committee and the Government Equalities Office led to a Government Consultation which ran from March to April 2019.

The Consultation aimed to better understand how confidentiality clauses and the legal framework that surrounds them work in practice and assess what changes are required to protect individuals from the misuse of these types of clause.

The current position

Confidentiality clauses are typically used to protect employers’ confidential information and to ensure confidentiality about the terms of any settlement agreement and the circumstances of an employee’s departure. These clauses cannot prevent certain types of disclosure, such as ‘whistleblowing’, however some employers have misused them by suggesting that they can prevent the employee from disclosing anything about their employment or the nature of their departure to anyone.

Response to Consultation

The Government has stated that it will legislate to:

  • Ensure that a confidentiality clause cannot prevent an individual from making a disclosure to the police, regulated health and care professionals or legal professionals;
  • Ensure that the limits of confidentiality clauses are clarified in settlement agreements;
  • Require specific independent legal advice be given to an individual in relation to a confidentiality clause when signing a settlement agreement.

Should a confidentiality clause contained in a settlement agreement not comply with new requirements they will be void.

The Government has also committed to:

  • Producing guidance on drafting requirements for confidentiality clauses;
  • Introducing new enforcement measures for confidentiality clauses that do not comply with legal requirements.
  • Require employers to clarify the limits of any confidentiality clause in a written statement of employment particulars.

Comment

The Government has committed to introducing this legislation ‘when parliamentary time allows’ but as a matter of good practice, employers should bear these new requirements in mind if drafting settlement agreements.

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