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The qualified right to flout non-disclosure agreements

07 December 2017 by Sarah Chilton and Wonu Sanda

The qualified right to flout non-disclosure agreements - Read more

Amid criticism of gagging clauses, greater awareness is needed of the enduring ability to make protected disclosures

A large number of people in the public domain have found themselves at the centre of a media storm around allegations of sexual harassment.

Many allegations are historic and although there are numerous reasons why victims may not have wanted to speak out at the time, one issue that has received attention is the possibility that many entered into non-disclosure agreements (NDAs) that sought to silence them.

One high-profile example is Zelda Perkins, Harvey Weinstein’s former assistant, who reportedly broke her NDA to speak about the alleged sexual harassment she suffered during her time at Miramax studios, leading to details being reported in the media.

Reasons for signing

Confidentiality clauses, commonly referred to as non-disclosure agreements or gagging clauses, are often included in settlement agreements.

A UK settlement agreement is frequently created at the end of an employment relationship, especially where there have been allegations made by the employee against the employer and where an employer wants the employee to waive any claims they may have against the employer – and any individual accused of harassment – in return for payment.

It is a legal requirement for the employee to take legal advice for the agreement to be binding, but often this can be a formality once a commercial deal has been agreed, as an employee can be keen to sign and may not focus on the potential restrictions.

“Many employers use these clauses to keep alleged wrongdoing out of the public eye”

On the face of it, the confidentiality clause would prevent the employee from talking about any harassment that they may have complained about, and – more generally – anything relating to the circumstances in which their employment came to an end.

However, it would contain some exceptions that allow the employee to speak to their lawyers, tax authorities, family and sometimes friends (as long as they keep it confidential), and for information already in the public domain.

Many employers use these clauses to keep alleged wrongdoing out of the public eye and avoid bad PR.

There is nothing inherently illegal about a confidentiality clause, and there will be circumstances where both employer and employee want to keep matters between themselves. Agreements can benefit both parties, preventing unwanted media intrusion into the private life of a victim of harassment, and protecting a business from negative publicity.

Protected disclosure

Confidentiality agreements been attacked for preventing workers from speaking out about past instances of sexual harassment and other wrongdoing. In principle even if an employee has entered into a confidentiality agreement to keep a harassment allegation quiet, they may still be able to speak about it in certain circumstances – but this fact is not well known.

If the employee’s disclosure of the allegation amounts to them making a ‘protected disclosure’, whistleblowing law lets them speak about the allegation even after signing a confidentiality agreement.

The disclosure will only be protected in certain circumstances, and there are limits on the person or entity to whom the information can be disclosed and certain requirements on the type of information that can be disclosed.

In some circumstances, the employee may still be able speak about the allegation to their employer or to a third party, like a regulator or the media. Under whistleblowing legislation, any contractual term that seeks to stop a worker from making a protected disclosure will be held to be void – and therefore unenforceable.

Protected disclosures can be made by the worker after their employment has ended and even if the employee is disclosing the same information multiple times to someone who is already aware of it.

To qualify as a protected disclosure, the worker must disclose information that they reasonably believe shows any of six categories of wrongdoing and is in the public interest.

The categories are: commission of a criminal offence; breach of a legal obligation; miscarriage of justice; endangerment to health and safety; damage to the environment; or the covering up of any of the aforementioned wrongdoing.

The wrongdoing can be past, present, prospective or alleged. Wrongdoing in the context of harassment could be breach of the Equality Act 2010, which prohibits sexual and other harassment; a criminal offence, for example if the sexual harassment amounted to an assault; or endangerment to the health and safety of other employees, who are being jeopardised by a culture of covering things up.

Fear of reprisal

The law in this area is complex. Although in principle confidentiality provisions cannot prevent a worker from blowing the whistle, workers do so rarely, either because they are unaware of their rights or because they do not know what steps they need to take to blow the whistle, while ensuring that they are not in breach of any confidentiality agreement.

Employees may be fearful that breaching their confidentiality obligations could find them liable to the employer for damages for any loss caused by the breach or for repayment of settlement monies received. For most, this would be a key deterrent against disclosing information.

“To qualify as protected, the worker must disclose information reasonably believed to fall in six categories of wrongdoing”

This issue arose a few years ago when the former chief executive of United Lincolnshire NHS Trust breached the confidentiality agreement in a settlement by speaking to the press about patient safety issues he had previously blown the whistle on. The trust threatened to sue him in order to recover the reported £500,000 it paid him when settling the claim.

This sparked criticism of gagging clauses in the NHS and suggests that even though an employer may be able to recover sums in some circumstances, there may be reputational repercussions.

Specific criteria

If a worker is contemplating disclosing harassment to the media after they have signed a confidentiality clause, they will want to ensure that they are legally permitted to do so.

For a worker to disclose harassment to the media and be protected by whistleblowing law, they need to meet specific criteria:

  • They must reasonably believe that both the information they disclose and any allegation contained in it are substantially true
  • They cannot be acting for personal gain, which may rule out a tell-all story to a newspaper in exchange for a generous pay-out
  • They have to have already blown the whistle to their employer or a prescribed person – usually a regulatory body – unless the wrongdoing is exceptionally serious or they reasonably believe that their employer will subject them to ‘detriment’ or conceal or destroy evidence if they do so
  • The making of the disclosure must be reasonable in all circumstances.

Raising awareness

It is clear that, although there may be protections in place letting staff disclose harassment after signing a confidentiality agreement, many employees will be unaware of this, and thus reluctant or scared to speak up. Such a culture of secrecy could allow unacceptable harassment to continue. Even with no change in the law, it would be good for the law to be clearer and better publicised.

For an employer who wants to stop harassment in the workplace, a culture of openness and transparency is key, and adequate bullying, harassment and whistleblowing polices will help achieve this. An open culture can also act as a deterrent to would-be harassers, knowing they may not be able to hide behind contractual confidentiality clauses.

From the employer’s perspective, it is sensible to view confidentiality obligations with caution. Although they do act as a deterrent against disclosure, they do not offer a guarantee that the employee will not be able to lawfully disclosure information to the media or a regulatory body, particularly if the employee is aware of their rights and properly advised.

Sarah Chilton is a partner and Wonu Sanda is an associate solicitor, both at CM Murray

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