Addressing the power balance and the use of NDAs

Napthens - June 17th 2019

Non-disclosure agreements (NDAs) are being used increasingly to settle employment related issues such as, accusations of discrimination and other grievance topics. On the 5th June 2019 the House of Commons Women and Equalities Committee released a new report on the use of NDAs in discrimination cases which raises a number of important questions for employers and employees alike.

At the end of 2018, Lord Hain, using his parliamentary privilege, publically exposed Sir Philip Green for using NDAs to supress allegations by his employees of sexual and racial harassment. This dramatic scenario highlighted the conflict between two schools of thought in relation to the idea of public interest and how NDAs operate. Some argue that NDAs hinder the public’s ability (or even right) to be aware of information that belongs in the public domain, something that the Human Rights Act 1998 supports. Others would argue that protecting confidence itself is in the public interest and as such, NDAs enable this and employers should be able to use them freely.

The committee’s report has made a number of suggestions on how the law could change to help address how NDAs should operate whilst protecting public interest. The key recommendations that we have identified are as follows:

  • all NDAs need to written in plain English so employees know what they are agreeing to;
  • Courts should give extra consideration to non-monetary losses and award increased damages to compensate;
  • the time limit for discrimination claims should be extended from 3 to 6 months; and
  • employers will have to pay some or all of the costs for the employee seeking legal advice when negotiating and signing the NDA.

The recommendations attempt to create an even playing field for employees who feel pressured into signing an NDA by giving them greater financial and practical support. However, by allowing an employee to recover legal costs even when they do not end up signing the NDA will likely place an unreasonable burden on employers and encourage them to go down the route of challenging the allegations through the Tribunals. As such, in some areas the report goes beyond redressing the balance between employer and employee, and instead leans towards removing an employer’s practical ability to protect its commercial reputation by coming to an agreement with its employees. If employers feel that it is not worth negotiating an NDA they will be more inclined to defend them, which involves: using-up already stretched Court time, increasing the stress for the employee and then potentially preventing the employee from receiving any pay-out at all at the end of the process.

We will wait to see which recommendations, if any, are put to Parliament. In the meantime if you have any questions or would like us to advise you on an NDA them please do not hesitate to contact a member of the Napthens Employment Team.