A new report has been published on the use of non-disclosure agreements in discrimination cases
Over the past couple of years there has been a great deal in the news regarding sexual harassment in the workplace, the “me too” movement that followed and revelations of cover ups by high profile figures. This continues to be a very topical issue and earlier this week, a report was published on the use of non -disclosure agreements in discrimination cases by the Women and Equalities Committee of the House of Commons.
Background to the report
Non-disclosure agreements were notoriously used by Sir Phillip Green, the billionaire Top Shop owner to prevent allegations of sexual harassment and racial abuse of staff from coming to light. Concerns about the potential misuse of non-disclosure agreements in such situations led the Women and Equalities Committee to launch an enquiry into whether the use of non-disclosure agreements in harassment and discrimination cases is unethical.
What does the report say?
The report is highly critical of the use of legal agreements to cover up allegations of unlawful and potentially criminal behaviour. Chief among the Committee’s criticisms were that:
- Many employees who signed up to such agreements did not feel they had a real choice but to sign up – not only because they could not afford to take on their employer in the tribunal but because they feared for their careers and potentially being blacklisted in the future.
- The use of such non-disclosure clauses and confidentiality clauses in settlement agreements had become endemic with little consideration given by employers or their legal representatives to whether or not it was ethical to include them.
- Instead of investigating allegations of harassment and discrimination, some employers were avoiding this by using non-disclosure agreements, thereby failing to hold the perpetrators to account and potentially allowing the unlawful behaviour to continue.
In its conclusion, the report says “We are concerned that the imbalance of power between employers and employees is one of the key drivers behind the widespread and commonplace use of [Non-Disclosure Agreements] in the settlement of discrimination cases. It is particularly worrying that secrecy about allegations of unlawful discrimination is being traded for things that employers should be providing as a matter of course, such as references and remedial action to tackle discrimination”.
What does the report recommend?
The report makes several recommendations to the Government – not only to “clean up” the use of non-disclosure agreements/clauses in the settlement of discrimination cases – but also to change the legislative framework and tribunal system to remove some of the obstacles which the Committee perceives are currently preventing victims of discrimination from achieving proper redress.
The main recommendations to the Government are as follows:
- A Government-initiated awareness-raising programme for employers and employees about handling grievances fairly and effectively, including guidance on how to continue investigations into allegations of discrimination and harassment even where a settlement has been agreed.
- The introduction of legislation to require employers to provide, as a minimum, a basic reference for any former employee (in an attempt to weaken the ability for an employer to use the giving of a reference as a bargaining tool in settlement negotiations).
- For legislation to make sure any clause in a legal agreement that limits the information the employee can share with others is clear and specific about what can and can’t be shared and sets out acceptable forms of wording that the employee can use to explain why they left their job e.g. in job interviews.
- To legislate to require confidentiality or non-derogatory clauses in settlement agreements to be written in standard, plain English, so it is clear what the parties are agreeing to.
- To introduce legislation to make sure non-disclosure agreements cannot be used to silence victims of discrimination and harassment where discussion of allegations is in the public interest.
- To extend the time limit for bringing claims in the tribunal from 3 months to 6 months in cases of alleged sexual harassment, pregnancy or maternity discrimination.
- To commission an equalities review of the Employment Tribunal system to consider whether particular groups of people or those bringing particular claims are disproportionately disadvantaged by the way the system operates, particularly with reference to time limits for bringing claims and the online publication of Tribunal judgments.
- To significantly increase compensation awards to do more to prevent discrimination and harassment in the workplace by, first, introducing punitive damages and a presumption that tribunals will normally require a losing employer to pay an employee’s costs in a sexual harassment claim and secondly, increasing the current awards available for non-financial losses such as injury to feelings and psychiatric harm.
- To require employers to pay for the legal costs of an employee for getting advice on any proposed settlement agreement, including advice on the content and effect of confidentiality, non-derogatory or similar concerns – such contributions to be payable whether or not the employee signs the agreement.
- To place a mandatory duty on employers to protect workers from harassment and victimisation in the workplace, breach of which will lead to substantial financial penalties
- To require employers to appoint a board level manager (above HR) to oversee anti-discrimination and harassment policies and procedures and the use of NDAs in discrimination and harassment cases
- To strengthen corporate governance requirements on all companies—public and private—to require them to meet their responsibilities to protect those they employ from discrimination and harassment
There is much to welcome in this report – the recommendations tackle an area that clearly needs regulation of some kind. Although you may not agree with every recommendation, the reasoning behind them is laudable. No one could argue, for instance, that to use non-disclosure agreements to avoid investigating serious allegations is clearly wrong and needs to be addressed. However, some of the recommendations regarding the use of non-disclosure agreements have been criticised as being unrealistic because many employers will simply not countenance settlement without a confidentiality clause in place. Hand in hand with this, some critics have said that the report also doesn’t reflect sufficiently on the public interest that can potentially be served by having such agreements. The argument goes that, for many parties, non-disclosure agreements are an essential means of avoiding expensive and stressful tribunal proceedings that no one wants – therefore they could be seen as serving the public interest in encouraging litigants to settle their disputes.
Action to take
Non-disclosure agreements and confidentiality clauses in settlement agreements do have their place and they are a common way of settling disputes that involve potentially damaging allegations both in and out of the workplace. However, they must not be used to pressure those who have suffered from discrimination or harassment at work to keep silent.
Our advice is to make sure you have the appropriate procedures in place to prevent discrimination and harassment at work, to make sure management are trained in how to deal with complaints of this kind and that staff are trained to identify such behaviour and to report it. As mentioned, settlement agreements can be beneficial to both parties, but employers should only offer a settlement agreement after all options to resolve a discrimination or harassment complaint have been exhausted and where all parties are happy to proceed with this arrangement.
You can read the full report HERE