NDAs are commonly used in settlement agreements in the UK, and particularly so in cases of workplace sexual harassment.
At their worst, NDAs silence victims and prevent them from speaking about their experiences, protect the powerful, avoid accountability and stop boards and shareholders from fully understanding their culture.
But there are a lot of cases where confidentiality is justified. For example, where a misplaced remark accidentally oversteps a line, where the incident in question involves two individual junior employees, where the victim genuinely wants confidentiality, or where the validity of the complaint is genuinely contested by the employer. A confidential settlement can allow both parties to move on without an admission of liability.
So, is there really a case for banning them?
NDAs almost always appear in first draft settlement agreements and are usually a pre-requisite to settlement, most especially in sexual harassment cases. If this is no longer allowed, employers may be less likely to settle.
Many employees would not consider taking allegations of sexual assault to an employment tribunal, where the legal costs regime is that each party bears its own costs. This was intended to allow a risk-free regime to allow employees to bring claims without the fear that they would be on the hook for the employer’s legal costs if they lose.
However, it also means that fighting a claim with legal representation is completely out of the question for many employees.
Furthermore, compensation for sexual harassment in the UK is not punitive – the median award last year for sex discrimination claims was £11,000 and the largest element is usually the financial loss.
For an individual who leaves employment but who secures alternative employment quickly, they will have little financial loss.
The claim is worth even less for those who remain in employment. Therefore, for most individuals, even if they can afford legal fees, the legal costs of pursuing a claim will be far more expensive than the likely compensation they would receive.
Read more: NDAs have an important role, despite a campaign to ban them
Additionally, backlogs in the tribunal system mean that cases often take two years to get to a hearing.
All of the above means that the threat of a legal claim is not such a significant risk for most employers. It is the threat of publicity that is a much more significant risk.
When a claim is lodged, it is only the fact that a sexual harassment or a sex discrimination claim has been lodged, and against whom, that appears on the public record. The facts of the claim are usually confidential until the case goes to a full hearing (unless leaked beforehand).
Without the ability to include an NDA in a settlement agreement and ensure confidentiality, employers would be more likely to wait to see if a case really is going to the tribunal, before deciding to settle it.
Read more: An employer's guide to non-disclosure agreements
This would mean that for all those employees who do not have the ways, means or desire to progress a claim to tribunal, they would have no remedy.
Reducing the use of NDAs
While banning NDAs may not be the answer, reducing their use is certainly something employers should be considering.
There is a growing movement towards breaking NDAs, particularly where there is a mass of victims. The reputational damage is massive if it comes to light that NDAs were used to cover up the actions of an abuser, for example in the case of Mohamed al Fayad and Harrods.
Employers should certainly be thinking twice when using an NDA where a perpetrator has been protected before – but could that even extend to one case of very serious sexual abuse or abuse by a high-profile individual?
Read more: Calling time on NDAs in discrimination cases
On a more positive note, the best employees want to work in an organisation that not only values diversity and inclusion, but also one that properly protects its employees, and is able to put its hands up when they fail to do so. An organisation that is confident it does that, can be confident enough not to need NDAs. If introduced as a policy, it shows a level of transparency and progressiveness and a tool for recruitment and retention.
By Julie Morris, employment partner at Keystone Law