The Equality and Human Rights Commission has this week published new Guidance on the use of confidentiality agreements in discrimination cases. The Guidance is non-statutory and much of its content is expressed to be ‘good practice’ rather than setting out legal requirements. Key recommendations include that in most cases employers should not use confidentiality agreements to stop a worker discussing an act of discrimination, that employers should pay for a worker to receive independent advice (including covering the adviser negotiating changes to the agreement if necessary) even if the worker ultimately chooses not to sign, and that the use of a confidentiality agreement should be signed off by a director or appropriate delegated senior manager.
The new guidance follows on from the recommendations made by the Work and Equalities Select Committee In June 2019 (see here) and the Government’s proposed reforms (yet to be legislated) published in August 2019 (here), but the best practice recommendations go considerably further than the latter and may be impractical or unrealistic in some situations.
In relation to confidentiality agreements in terms and conditions of employment, the Guidance suggests that:
- these should make clear that the agreement does not stop the individual from speaking about any form of discrimination, for example by excluding this from the definition of confidential information
- workers should not be put under pressure to sign and should be given time to seek advice
- the worker must always be given a copy of the agreement.
In relation to settlement agreements, the Guidance sets out the following good practice which, it is suggested, will help employers “reduce the potential for confidentiality agreements to have an adverse impact on the individual worker and on workplace culture”:
- confidentiality clauses should not be included in a template agreement, and should only be added after consideration on a case-by-case basis when required
- in most cases it will not be necessary or appropriate to use confidentiality agreements that stop a worker discussing an act of discrimination with others. (On its face this goes further than the Select Committee’s recommendation that confidentiality agreements should not prevent workers discussing potential claims with other alleged victims, or supporting such victims through the trauma of raising a complaint of discrimination and harassment.) There may be exceptions to this where
- the individual worker asks for confidentiality, or is a witness to an act of discrimination and the victim wants confidentiality
- the employer has thoroughly and fairly investigated and heard the complaint and found it to be false, and the use of an NDA is appropriate to protect the reputation of the falsely accused individual (of course an accused individual will also want to have their reputation protected against bad-mouthing where neither guilt nor innocence can be conclusively determined)
- there are other legitimate business interests, for example to avoid prejudice while an internal investigation or disciplinary or tribunal proceeding is ongoing
- in each case the employer should weigh up the reasons for and benefits of using a confidentiality agreement against the impact on the worker and on the workplace culture and the benefits of not using one
- if a confidentiality agreement is used, it should be as limited as possible in terms of the scope of discussion which is prohibited, and the employer should inform the worker of its reasons for deciding that an agreement is appropriate
- any confidentiality agreement should also have the now-standard carve-outs (for disclosures to regulators, police, medical/legal/tax advisers bound by confidentiality, HMRC, immediate family in confidence, and a worker’s trade union); in addition the Guidance recommends permitting discussion with a potential employer “where and to the extent necessary to discuss the circumstances in which their previous employment ended” ie, not just to discuss what they did in their previous role. (The Select Committee recommended that individuals be able to decide whether to tell a third party or a new employer why they left a previous employment if the case involved allegations of unlawful discrimination, and that acceptable wording be included in a settlement agreement.)
- if a confidentiality agreement is used, it should normally be mutual, ie the employer should be obliged to require its other workers not to discuss the same issue
- the worker should be given the opportunity to secure independent advice or representation during the negotiation phase and, if this is not possible, the employer should consider using ACAS early conciliation to resolve the matter through a COT3
- the employer should pay for the worker’s costs of receiving advice even if they reasonably decide not to sign; the employer can impose a reasonable limit on costs but it should cover advice on the settlement agreement, including the confidentiality clause, and the negotiation of changes if necessary (this mirrors the Select Committee recommendation)
- the worker should be given at least 10 days to take advice on the agreement, unless there are exceptional circumstances
- the use of a confidentiality agreement should be signed off by a director or an appropriate delegated senior manager, and by someone who, where reasonably possible, was not involved in the allegation or its investigation.
The Guidance also notes that, in order to be able to establish a reasonable steps defence to a future discrimination claim, an employer must investigate the allegations where possible and reasonable, even though the claim has been settled, and must then take reasonable further steps to address the issue and prevent reoccurrence.
Employers are advised to monitor their use of confidentiality agreements and, subject to data protection issues, a central record of agreements is recommended for large employers, those who use a significant number, and those with multiple sites. The central record could include when, why and for what type of claim they have been used, who the allegations were against, and what type of confidentiality agreement was used. The board of directors should have oversight of this central record; they should also ensure that policies and procedures require managers to escalate concerns about the workplace culture, systemic discrimination or repeated or highly serious acts of discrimination by one individual.
The Guidance also touches on penalty clauses (eg, a requirement to repay compensation if the worker breaches a confidentiality agreement, where the amount is out of all proportion to the damage caused by the breach). It states that penalty clauses “must not be used” and notes that, while it is for the court to determine if a clause is a penalty, employers should not include one (perhaps for its deterrent effect) unless it reasonably believes that it is likely to be enforceable. Furthermore, warranties that the worker is not aware of anything that would be a protected disclosure or a criminal offence should not be used either. This is because the worker may feel under pressure to agree to the warranty even though they are aware of such information, and as a result they later feel silenced from raising it for fear the employer will claim breach of warranty. Instead, employers should simply encourage workers to raise any such issues in one-to-ones and exit interviews, without the threat of breaching a warranty. (These issues were also raised by the Select Committee.)
Best practice employers will want to review their template settlement agreements and processes in light of this new guidance.