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NDA misuse clampdown: HR experts react

While some have welcomed changes, others say they won't be enough alone and have called on HR to stamp out bad behaviour through strong organisational culture

The government has confirmed new legislation to tackle the misuse of non-disclosure agreements (NDAs) in the workplace, including to cover up sexual harassment, racial discrimination and assault.

Minister for small business, consumers and corporate responsibility Kelly Tolhurst announced plans on 20 July for new legislation that will prohibit NDAs from being used to stop individuals disclosing information to the police, regulated healthcare professionals or legal professionals.

Currently NDAs cannot be used to prevent an individual from reporting wrongdoing if it's in the public interest, or to prevent someone from taking a matter to an employment tribunal.

Now employers will also be required to clearly set out the limits of confidentiality clauses in 'plain English', so that individuals know what they are signing up to. Employees who sign an NDA will get independent legal advice, including that they can still disclose issues to the police, healthcare staff or legal professionals.

Any agreement that doesn’t comply with these conditions will, under the new legislation, be void.

Tolhurst said that the new legislation is aimed at the minority of employers who do not use NDAs appropriately. “The vast majority of businesses comply with the law and use NDAs legitimately – from protecting commercially-sensitive information to preventing information being shared with competitors,” she said.

“As we have seen in the news recently, there are a handful of employers using NDAs to cover up criminal acts in the workplace; including sexual harassment, assault and racist discrimination.

“We will not tolerate the use of NDAs to silence and intimidate victims from speaking out. The new legislation will stamp out misuse, tackle unacceptable workplace cultures, protect individuals, and create a level playing field for businesses that comply with the law.”

But some have countered that only part of the new proposals will make a difference to how NDAs are handled, and that further measures should be introduced. "The only new proposal of substance is the recommendation that it be made unlawful to prevent an employee disclosing information to the police, regulated health professionals and legal professionals – regardless of the terms of any non-disclosure agreement entered into," said Dan Hobbs, a barrister at 5 Essex Court.

"This proposal is to be welcomed but it doesn’t go far enough. Employees should also be able to disclose information to immediate family members and industry regulators such as the Financial Conduct Authority and the Care Quality Commission if the correct balance is to be struck.

"Most non-disclosure agreements are presently contained in ‘settlement agreements’ that are used by employers and employees to compromise disputes before they reach the employment tribunal. It is already the law that before signing a settlement agreement the employee must receive legal advice. In addition, the existing legislation makes it unlawful to prevent an individual from reporting wrongdoing in the public interest," Hobbs added.

Chris Roebuck, honorary visiting professor of transformational leadership at Cass Business School, City University of London, said that organisational culture is just as important as policy in preventing NDA misuse. He told HR magazine that HR professionals must have the courage to stand by their values if they witness NDA misuse.

"How many in HR keep quiet when they see an employee who genuinely does the right thing being crushed by an organisation, and sent through the door gagged with an NDA? How many in HR protect an organisation’s values even when they’re expected to drop them under pressure from organisational leadership?" he said.

Ultimately NDAs are not needed if an organisation is behaving correctly, he added: "The CIPD has pondered this question and no doubt the government's plans for action will move that forwards. But surely we in HR need to lead this discussion as experienced real-world arbiters of what needs to happen for the good of both individual employees and organisations. If an organisation has behaved well at all stages, why would an NDA even be required?"

Rebecca Hilsenrath, chief executive of the Equality and Human Rights Commission, welcomed the proposals but agreed that policies around NDAs alone will not fix the root causes of harassment and discrimination at work. "Harassment and discrimination should never go unanswered and unchallenged just because victims are prevented from speaking out," she said. "This new legislation will help to end ambiguity about employees’ rights and stop the misuse of NDAs to protect corporate and personal reputations and obstruct justice.

"[But] the use of NDAs is only part of the problem of workplace harassment and discrimination, and employers must step up to protect their employees from this appalling behaviour before it happens. We are developing new guidance on NDAs and tackling harassment, which will provide further clarity for employers and help them create safe and supportive working environments."

Ben Wilmott, head of public policy for the CIPD, agreed that organisations must now focus on creating cultures where harassment, bullying and discrimination aren't tolerated. “We welcome the government’s plans to tackle the minority of cases where NDAs are used unethically to potentially prevent victims of alleged harassment or discrimination from speaking out about their experience," he said. "We particularly welcome plans to make clear the limitations of a confidentiality clause so individuals signing them fully understand their rights. Proposals to ensure that individuals signing NDAs will get independent legal advice on the limitations of a confidentiality clause are also a positive step.

“However, changes to the law alone will not help to prevent harassment and discrimination from occurring in the first place. There needs to be far greater recognition in some organisations that their culture has to change. This change starts with leaders and managers role-modelling the right behaviours and a greater focus on boosting diversity and inclusion.”