We welcome the inquiry and look forward to the forthcoming Government consultation on the issue. High profile and disturbing incidents such as the President’s Club dinner and Harvey Weinstein allegations show how damaging the inappropriate use of NDAs can be in alleged harassment and discrimination cases. It’s not surprising, therefore, that one of the first questions the Select Committee’s inquiry asks is whether or not the use of NDAs should be banned or restricted in these types of cases.

Before answering this key question, it’s important to define an NDA. The term is often used in a catch-all way, but it’s important to differentiate between the different types of agreement: [1] ‘non-disclosure agreement’ [NDA] or confidentiality agreement and [2] the confidentiality terms in a settlement agreement. The former can be used as part of an employment contract but its intended use is to protect commercial interests such as trade secrets. Settlement agreements are legally binding contracts which can be used to end an employment relationship on agreed terms or to resolve an ongoing workplace dispute, and it is this type of NDA that our comments focus on.

From a legal perspective the confidentiality obligations in a settlement agreement do not affect the employee's right to:

• raise a protected disclosure under the Employment Rights Act 1996;
• report wrongdoing or malpractice to a regulator; or
• report a criminal offence.

Should NDAs be banned?

We recognise that the use of confidentiality terms in settlement agreements to prevent victims of harassment or discrimination from speaking out about their experience, while protecting the alleged perpetrator from being held to account for their actions, is a deeply unsatisfactory scenario. However, having weighed up the experience and insights provided by senior HR practitioners, we think a ban on NDAs in these cases would not automatically foster more inclusive and harassment- and discrimination-free workplaces. Such a move could have an unintended negative impact on many victims of inappropriate behaviour, causing more victims to suffer in silence or leave an organisation without any redress. As one HR consultant and former HR Director told us:

‘If NDAs were banned, we would be likely to see fewer victims being prepared to raise issues of sexual harassment in the workplace. It would also go against the grain of public policy that seeks to reduce the amount of litigation and increase the amount of disputes that are settled.’

The confidentiality terms in a settlement agreement should never be used to silence someone who has raised a complaint about alleged harassment, discrimination or bullying, and an organisation should never exert pressure on an individual to sign such an NDA. But if used ethically and appropriately, in certain circumstances a confidential settlement agreement can provide a legitimate and dignified way of resolving an employment dispute for both parties. As one CIPD member and former HR director summarised:

‘There is a real danger here of throwing the baby away with the bath water. Restricted? Maybe, but definitely not banned. They should be managed and made workable for those that require them. We shouldn’t forget that NDAs can be important for employees just as they can be for employers. The use of NDAs for the right reasons can help give victims of sexual harassment some redress and recognition of their treatment and way of leaving an organisation with some dignity.’

However, we also heard from a number of senior HR practitioners to inform our submission to the Committee, who believe that banning the use of confidential settlement agreements in harassment or discrimination cases would be the right thing to do. The range of views on this issue highlight its complexity as well as the the need for a more in-depth consultation to allow for more evidence to be gathered.

How can we ensure the proper use of NDAs?

As the Acas Code of Practice and guidance relating to settlement agreements makes clear, there are already a number of statutory protections in place to ensure the appropriate use of settlement agreements and their confidentiality terms. For example, an employee must have received advice from a relevant independent adviser, such as a lawyer or a certified and authorised member of a trade union. As the regulatory body overseeing the ethical behaviour of solicitors, the Solicitors Regulation Authority has issued a warning notice and practice note highlighting the legal principles and good practice in this area.

The revised Acas guidance, launched in November 2018, also states that confidentiality clauses should only be used when necessary and should not be included in settlement agreements as a matter of course.

However, there are still cases where employees who have raised complaints about harassment or discrimination have been pressured into signing an NDA and are unaware of their statutory rights after signing one. An outright ban of NDAs won’t solve the problem, and there is no silver bullet – but there needs to be action on a number of fronts to ensure NDAs are used in an ethical way. For example:

Improve access to quality legal advice for employees

Stronger action is needed to ensure that any individual entering into a settlement agreement with a confidentiality clause is made fully aware of its legal status, and that they are not prevented from making a protected disclosure under whistleblowing legislation. They should also be made fully aware of the implications of signing such an agreement.

It is the employee who is likely to face the more significant financial barrier to obtaining good quality and sufficient legal advice. As one HR Director pointed out:

‘It depends, of course, on the size of the employer. A FTSE company will have access to its own lawyers; it is much more difficult for the employee who will be bound by the limit their employer may put on the amount they will pay for the employee to access legal advice. There is a real need to create a level playing field as the system currently contains more obstacles for the employee than for the employer.’

Currently the cost [typically met by the employer although this is not mandatory] of a solicitor signing off a settlement agreement may not be sufficient for detailed advice or negotiations, and so consideration should be given to increasing the level and quality of legal advice available to the employee.

Given the complexity of the implications for signing a settlement agreement regarding an employee’s future rights in relation to harassment and discrimination and whistleblowing, consideration could be given to whether or not regulatory change is needed to stipulate that independent legal advice should be obtained. This would not prevent an employee from also obtaining advice from a trade union representative or advice centre worker, and we are not suggesting that the quality of advice provided by such individuals is poor. However, members of the legal profession are regulated for their ethical behaviour and so the accuracy and quality of the advice they give will be subject to closer scrutiny including disciplinary action and the loss of their licence to practice if they are found to be in breach of the rules governing their professional conduct.

Stronger guidance provided by experts and professional bodies

Stronger good practice guidance should be promoted across employment, and all professional bodies and employment organisations have a responsibility to make sure this is effectively communicated and practised by their members and employers.

More robust guidance on the appropriate and ethical use of NDAs could be included in the Acas guidance on settlement agreements, and the CIPD is also expanding its good practice guidance in this area.

Fostering inclusive workplace cultures

Where there is alleged harassment or discrimination, HR has a responsibility to ensure that the confidentiality clauses in settlement agreements are used ethically and appropriately, and that employees are fully aware of the legal status of such an agreement, including their inability to bring a future claim to an employment tribunal. They should not be used to cover up cases of alleged discrimination and/or bullying, or to deter a person from reporting misconduct such as making a protected disclosure under whistleblowing legislation.

People professionals also play a key role in developing cultures where discrimination and harassment are known to be unacceptable and where individuals are confident enough to bring complaints without fear of ridicule or reprisal. Organisations should deal promptly, seriously and discreetly with any issues that are raised. Employees, and in particular line managers, should be encouraged to play their part in making the organisation’s equality and dignity at work policies a reality and be prepared to challenge inappropriate behaviour if they observe or have evidence that someone is being harassed or bullied.

Alongside policies, employers should promote the importance of respect between employees at every level of the organisation, encouraging a supportive and inclusive culture so that people's behaviour reflects the right values. Senior leaders and line managers need to role model and champion these behaviours and set the tone so that the workforce feel secure and can get on with their work without worry or fear of recrimination should they raise any concerns. When dealing with harassment and other inappropriate behaviour at work, prevention is better than cure.