New laws introduced to crackdown on the misuse of non-disclosure agreements

The way in which many employers are able to utilise non-disclosure agreements (NDAs) is set to be restricted in the future, with the government announcing their commitment to preventing these agreements being used inappropriately in the workplace.

This announcement follows a public consultation on NDAs and confidentiality clauses earlier this year, which ran from 4th March to 29th April. The consultation specifically sought public opinion on what changes could be made to prevent NDAs being used to prevent staff reporting accusations of sexual harassment or discrimination.

Firstly, the government have promised to legislate so that NDAs can no longer include provisions that prevent individuals disclosing information to the police or relevant authorities. Although NDAs cannot currently prevent employers disclosing this information, there was a consensus that a number of employers wrongfully included such restrictions within their NDAs, which may have been effective in making employees question their legal rights in this scenario.

The consultation also found that the terminology used by employers within NDAs can often prove misleading for employees and cause them to misinterpret any limitations within the agreement. As a result, the government will require all NDAs to be constructed using ‘standard plain English’, thereby ensuring staff have a correct understanding about what information they can share and with whom. Given that the wording of NDAs will vary greatly from one organisation to the next, guidance will be produced by ACAS and the Equality and Human Rights Commission to advise employers on how to draft suitable agreements going forwards.

In another measure to remove uncertainty around NDAs, the government will ensure that when seeking legal advice on the contents of a NDA from a legal professional, this individual will be entitled to explain any specific legal disclosure rights contained within. This is designed to make sure staff have a full understanding of the implications prior to signing, ensuring they aren’t left with unsatisfactory agreements.

Finally, there is a commitment to introduce new enforcement measures when confidentiality clauses are included in settlement agreements, or employment contracts, that fail to abide by legislation. In this scenario employees will now be able to seek additional compensation from their employer in an effort to discourage the unlawful use of these agreements.   

Given that the government is currently pre-occupied with Brexit negotiations it remains to be seen when these new laws will receive approval from parliament. However, once they are approved this should have a significant impact on the way in which NDA’s and confidentiality clauses are used in the future.

Whilst employers will still be free to use these as part of their normal business practices, it will be important to ensure any relevant adjustments are made. Failing to abide by these new requirements will not only risk rendering NDAs invalid, but could also result in costly reputational damage for employers given the increased media focus on workplace harassment and discrimination.

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