NEW YORK, UNITED STATES – FEBRUARY 21, 2020: Former Hollywood film producer Harvey Weinstein leaves … [+]
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Harvey Weinstein may have been convicted in the US and is awaiting sentencing, but in the UK since #metoo started there have been a number of inquiries and consultations looking at sexual harassment in the workplace, including the use, and misuse, of non-disclosure agreements.
Over a year after the Government published its response to the UK Parliament Women and Equalities Committee (“WEC”) Inquiry Report and recommendations into sexual harassment in the workplace, we have seen no new legislation seeking to deal with the key issues highlighted by the Report and no indication that new law will be on the horizon any time soon.
It was the issue of NDAs which got much focus during 2018. Often cited as one of the key reasons sexual harassment was able to be perpetuated for so long, there were many calls to ban them completely.
The Government have not legislated on the issue of NDAs. There was a further consultation on this issue with the WEC being tasked to investigate the matter. Their report was published in June 2019 and the Government’s response was published in October 2019.
What is an NDA?
An NDA is any confidentiality clause in a contract which prohibits disclosure of information. The majority of NDAs which arise in a sexual harassment context are contained within settlement agreements, which are contracts used to settle claims and potential claims made against employers, often at the termination of someone’s employment. Those contracts do a variety of things, frequently they contain arrangements for the termination of an employee’s employment, confidentiality provisions around business confidential information, such as trade secrets, details of the financial settlement, and waivers of claims, sometimes from both parties. Those contracts almost always contained a clause which prohibited the employee disclosing the existence and terms of the contract, and, many of those clauses also prohibited the disclosure of the circumstances which led to the agreement and/or termination of employment. It was these aspects of the clauses which were troubling the WEC and many others. Clauses of that type had been entered into by many employees, including, famously, Zelda Perkins, former employee of Miramax. Perkins gave evidence to the WEC that she had to negotiate the terms of the agreement in an overnight settlement meeting, and that she believed that if she breached the NDA, she would probably go to jail.
For the avoidance of doubt, that is not the case, and never was. An NDA contained in this type of agreement is a civil law matter, not one which will end up with someone going to prison, but, her belief highlighted another key issues with these clauses: that many people who had entered into them did not fully appreciate and understand what they had agreed to, the consequences of breaking the NDA and what the limitations of the NDA were.
What are the limitations?
Even without any change in the law, there are limits to what an NDA can prohibit. They cannot, for example, prevent someone from reporting a crime to the police or from reporting a regulatory breach to a regulator, such as the FCA. They cannot prevent someone from making a protected disclosure, that is a disclosure under whistle-blowing legislation. This has long been the position on NDAs but it was not widely understood and until 2018 no spotlight had ever been shone on it. It was clear that not everyone signing an NDA fully understood the limitations and, further, that not all NDAs stated the limitations, making it even harder for those entering into them to know what they were agreeing to. Under UK employment law, someone signing a statutory settlement agreement, that is an agreement to settle statutory employment claims, which includes discrimination and harassment claims, must receive legal advice. However, the level of advice inevitably varies, individuals in distress often don’t focus, understandably, on all aspects of the advice received as they are often under intense pressure to settle. If an employee seeks to refer to the document several years later, they may not have retained the advice or ever have received it in writing and may, therefore, simply take what is written in the NDA as the full position.
Change was required. I didn’t agree with some that a total ban was appropriate. I saw first-hand many claimants who wanted an NDA because they equally didn’t want anyone talking about what was a very difficult, distressing and traumatic set of circumstances. Some claimants offered their silence, knowingly, to leverage a better financial settlement (the compensation for sexual harassment in the UK being fairly low – which is another issue which requires to be addressed). A total ban could have taken more power away from victims of harassment. What was quite clear, however, was that reform was needed. Everyone needed clarity about what they were signing; those drafting NDAs needed to take responsibility for that task and draft in clear, plain English, setting out the limitations of the clause; employees should not be forced to sign an NDA whether in a settlement agreement or at the beginning of the employment relationship (unless it related to a legitimate need to keep matters confidential such as trade secrets or client data) and, something needed to be done to address the concern that NDAs were covering up systemic harassment in organisations, putting others at risk. Put simply, they needed to be used only in a sensible, fair and ethical way, with some form of monitoring.
That was then, what is the position now?
The Government response included a commitment to legislate, saying, “the Government intends to legislate to require non-disclosure agreements within settlement agreements to clearly set out their limitations. The written statement of employment particulars will also be required to clearly outline the limitations of any confidentiality agreement that a person has entered into.”
We don’t have new legislation, instead, we have guidance emanating from various places, most recently from ACAS (the Advisory, Conciliation and Arbitration Service – a UK Government body providing guidance and services for employers and employees). The guidance is non-statutory, but employers would be sensible to follow it to comply with best practice. Parts of the guidance summarise the current legal position, some goes further and adopts recommendations of the WEC. Guidance has also been published by the Equality and Human Rights Commission in the UK, in October 2019.
The ACAS guidance, published in February 2020, summarises the current position relating to NDAs and their limitations. It seeks to encourage employers to consider alternatives to NDAs and to really think about whether an NDA is required in the circumstances, the consequences of using an NDA and any moral or ethical issues presented by its use.
The alternatives to NDAs posited by the guidance include following proper procedures, for examples, investigations, grievance and disciplinary processes. In my experience, employers and employees don’t necessarily view a proper process and an NDA as mutually exclusive. NDAs aren’t always used to avoid a process (although there certainly are circumstances in which they have been) but rather they are included in a termination agreement which is created at the end of a process when, sadly and unfairly, it is still common for a victim to leave. Frequently, therefore, by the time a complaint is made it is too late – the harassment has happened and, whatever process is followed, damage has been done. It is therefore important not to lose sight of tackling the behaviour in the first place, rather than just the NDAs. I hope that the guidance relating to awareness raising and monitoring may help employers to tackle the behaviour and get a clear picture of any systemic issues.
The ACAS guidance encourages employers to ensure that those who decide to include confidentiality clauses in agreements never pressure an employee to agree to an NDA and encourage employees to raise concerns about the clauses, and ensure the employee understands what they are signing. Importantly, the guidance states that employers should monitor the use of NDAs. Broader monitoring is key to understanding wider issues in an organisation, and ensuring that repeat offenders are not repeating their behavior in the expectation and knowledge that it will be covered up by an NDA. I fear, however, monitoring is not enough. The WEC went further and recommended that boards take greater responsibility in overseeing an organisation’s use of NDAs and called on the Government to strengthen corporate governance requirements for all companies, large and small, to protect those they employ from discrimination and harassment.
The guidance also lists inappropriate and/or unlawful use of NDAs, including when: “agreements are used to cover up or deter workers from reporting matters including any form of discrimination, harassment, sexual harassment or whistle-blowing; an issue affects a number of other workers and keeping some or all of the details of a settlement confidential could have wider impacts due to a lack of transparency or lead to further complications; a confidentiality clause is used as a matter of routine, leading to a culture which lacks openness and where workers do not feel confident that their complaints will be taken seriously or lead to workplace improvements; trying to hide an issue in this way makes it less likely an employer will address any underlying issues that could cause further problems, and; a confidentiality clause is seen as a ‘bargaining chip’ for a worker seeking an agreed basic reference.”
Whilst this guidance is non-statutory, and the Government have so far failed to legislate, I hope it will at least help employers to navigate the issue in a fairer, more ethical and safer way, but, there is more which could be done.