Outlawing NDAs isn't good for employees or employers


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Generally speaking, both the employer and employee want confidentiality provisions in settlement agreements

On 11 June the Women & Equalities Committee (WEC) published The use of non-disclosure agreements in discrimination cases, its report into the confidentiality provisions in agreements that settled discrimination claims (NDAs).

The WEC heard evidence from a variety of groups including HR professionals, employment lawyers and anonymous members of the public who have entered into agreements with their employers that prevent them from disclosing certain events.

This had been largely prompted by some widely reported NDAs contained in the settlement agreement between Harvey Weinstein and his personal assistant, which imposed certain restrictive and unusual confidentiality obligations on her. Examples such as this are the exception rather than the rule and it is absolutely correct to criticise them.

The report made some excellent and practical recommendations. However, one of the key areas explored was the way discrimination allegations are dealt with generally by employers, with evidence that some are using settlement agreements as a way of avoiding carrying out investigations.

Ben Wilmott from the CIPD commented that “there are examples of poor practice, and of course we should be absolutely trying to improve practice” but did not accept that poor practice is commonplace. It is unlikely that the very grim picture painted by the WEC in its report is one recognised by many HR and employment law practitioners.

In our recent experience, companies have made no hesitation in swiftly dealing with harassment at their organisations, no matter how much of a ‘rainmaker’ the perpetrators are. After all, if they don't, the employee can remain in employment, bring a claim for sexual harassment, and then when the tribunal sees the employee’s evidence and awards the claim in their favour, they will generally hit the employer as hard as possible with injury to feelings awards and possibly costs.

As the Harvey Weinstein case has brought into sharp focus, no matter how much of a rainmaker an individual is the effect on a business of having such sustained allegations can be catastrophic. Even more so in the Millennial age where employees would not, as a matter of principal, work for an organisation with such a reputation.

Employers generally take allegations of sexual harassment extremely seriously but there are practical difficulties not touched on by the WEC. Often it is one word against another, without any other supporting evidence, where a duty of care is owed to both employees. To believe a woman over a man will lead to allegations of sex discrimination. It is often these difficult situations that are dealt with through a settlement agreement – not because the employer does not want to investigate but because it is one word against another, the victim is clearly upset, and the business does not want to say ‘we disbelieve you’ but neither can it admit liability.

Settlement agreements always involve paying compensation to the employee and sometimes this can be considerably more than an employee would achieve at a tribunal. If confidentiality was not available then an employer is unlikely to enter into a settlement agreement and an employee wanting a finding in their favour will be forced to litigate, which will be stressful, public and costly.

Generally speaking, both the employer and employee want confidentiality provisions in settlement agreements. The employee wants to move on with their life and many successfully do, provided that the settlement agreement covers important issues like what can be said in interview and guarantees of a good reference. It is the employment lawyer’s job to ensure such terms are included. Equally, an employer must guard against those making copycat allegations to perhaps avoid disciplinary action or simply to get some money – situations seen by practitioners more and more in the workplace.

The interests of justice need to be balanced. Parties are encouraged to settle their disputes without the need for litigation but we risk jeopardising this important principle (and throwing the baby out with the bath water) if we simply outlaw NDAs without taking a more nuanced and balanced approach.

However, changes do need to be made to ensure that such agreements are not just done through an ACAS COT3 where the employee does not need legal advice to be bound by confidentiality terms. The employer should be making a sufficient contribution to the employee’s legal adviser to get proper advice on options and the agreement should not prevent the employee from participating in proceedings involving similar allegations.

The WEC did pick up on one very key problem though – that tribunal judgments are now posted on the government website and because of this employees are afraid to take matters further. While anonymity orders in cases of sexual harassment can be asked for and granted, perhaps the time has come to extend this to all allegations of discrimination?

Beverley Sunderland is managing director of Crossland Employment Solicitors

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