Confidentiality Agreements/Non-Disclosure Agreements

By Rachel Davis

Principal Associate

The Equality and Human Rights Commission (EHRC) has published guidance on the use of confidentiality agreements.

Employers routinely use settlement agreements as a way to settle any potential claims an employee may have against them at the time they leave their employment. If a claim is pursued through Acas settlement may be reached by way of what is known as a COT3 agreement. Both documents would usually contain confidentiality clauses. In addition, there has been several reports in the media surrounding the use of non-disclosure agreements.

These documents are often used by employers to prevent employees from bringing claims in relation to discrimination, harassment and victimisation.

The aim of the guidance is to clarify the law with regard to confidentiality agreements and, although it is not legally binding, it sets out good practice in relation to their use. The guidance states that:

  • Employers should not include confidentiality provisions as standard in any template settlement agreements but instead should consider on a case by case basis whether there is a clear reason for the confidentiality clauses and the impact the use of such clauses may have on the culture of organisation
  • It should be made clear that the confidentiality clauses do not prevent employees from reporting their concerns to the relevant authorities such as the police, regulators, lawyers, medical professionals or their immediate family members and in certain circumstances to their potential employer
  • Employers should pay for their employees to seek independent legal advice as to the terms of a settlement agreement, including any confidentiality clauses, regardless of whether the employee ultimately signs the agreement or not
  • Large and multi-site employers should keep a central record of all settlement agreements so that they can monitor whether there are any systemic discrimination issues within the organisation.

The government has previously indicated that it would introduce legislation which would require that confidentiality clauses in both settlement agreement and employment contracts must clearly set out their limitations. It would also require that employees take specific advice on the confidentiality clauses in settlement agreements rather than as part of the general advice they receive from solicitors on the whole document.

If you are considering entering into a settlement agreement we recommend you seek specialist advice before discussing with your employee for guidance on what should, and should not, be included in the agreement.

For more information on non-disclosure, confidentiality and settlement agreements, please contact our Employment Team on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch.