Further criticism of the use of NDAs in discrimination cases

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05 July, 2019

Rosalind Leahy

The House of Commons Women and Equalities Committee published its report into "The use of non-disclosure agreements in discrimination cases" last month. The Committee launched an inquiry following the concern surrounding non-disclosure agreements ("NDAs") in the wake of the #MeToo movement, which brought to the forefront of the international consciousness the conflicting understanding of the perceived and true reality of workplace environments for many women. This brought with it concern that the historical use of NDAs could have prevented victims of sexual harassment from speaking to the relevant authorities; preventing action by authorities, obstructing truth and mechanisms for change within workplace environments, and obstructing the rule of law and administration of justice. Essentially, the Report seeks to challenge what it refers to as a 'cover-up culture', and the propensity for NDAs to silence victims of discrimination and harassment. Employers and legal advisors are reminded that they should not be complicit in using NDAs to cover up allegations of unlawful acts.

The Report stressed that the imbalance in power between an employer and an employee can leave employees vulnerable to pressure to enter into NDAs prohibiting them from speaking out, feeling that there is little alternative for them. It highlights the belief that entering into an NDA for many employees is not 'benign', and calls on the Government to take action to effect change. The Committee stresses that the Government must;

"reset the parameters within which NDAs can be used and must address the failure of the Employment Tribunal System to ensure all employees who have suffered discrimination have a meaningful route of legal redress."

In order to effect change, the Report advises the Government to:

  • Ensure NDAs cannot be used to cover up allegations of unlawful discrimination and/or harassment;
  • Provide clarity as to the wording used in confidentiality clauses to ensure employees can understand what information can and cannot be shared;
  • Strengthen corporate governance requirements to require employers to protect employees from discrimination and harassment, including a mandatory duty on employers to protect workers from harassment and victimisation in the workplace. The Government should consider requiring employers to investigate all discrimination and harassment complaints irrespective of whether a settlement is reached; and
  • Improve the remedies that can be awarded by employment tribunals and ensure that cost issues are not a disincentive. Tribunals should be permitted to award punitive damages and awards for the non-financial impact of discrimination should be increased significantly.

The detail of the Report addresses some further issues. For example, the lack of action on the part of regulators to require employers to protect employees is highlighted in the Report. It also stresses that NDAs have been used by some employers (particularly in the education sector) to avoid conducting investigations into discrimination or harassment allegations. Also, the lack of a legal obligation on employers to provide a reference exacerbates the imbalance in power between the employee and employer, with employees often believing that they need to agree to enter into an NDA in order to obtain a reference. Many individuals questioned by the Committee stated that they had signed NDAs partly to protect their career and reputation from the public nature of the tribunal process.

Although the focus of the investigation was originally intended to consider the detrimental effects of NDAs on reporting matters to authorities, further effects were identified. Some interviewees were found to have suffered emotional and psychological damage as a result of their experiences alongside financial detriment.

Whilst the Report does recognise the importance employees having the option to settle such disputes to enable them to avoid the traumatic and drawn out tribunal route and to provide closure, it has been criticised for not giving enough weight to this consideration. Commentators believe that the ability of employees to settle a matter finally is as important to them as it is to an employer. So whilst there are areas for concern surrounding the use of NDAs, any steps taken to address these concerns should protect the ability of employees to settle matters with the peace of mind that their confidentiality has been maintained.

What does this mean for employers? Whilst the government is unlikely to adopt all of the recommendations in the Report, it is clear that this area is being subjected to significant scrutiny at the current time, politically and legally. The recent reference of a solicitor at a magic circle firm to the SRA for investigation demonstrates that this is a sensitive area of practise for lawyers, and employers with any concerns regarding settling contentious complaints by members of staff involving sexual harassment or discrimination claims should seek legal advice.

For more information contact Rosalind Leahy in our Employment & HR department via email or phone on 01772 220185. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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