Use of confidentiality agreements in discrimination cases – the EHRC publish new guidance

Courts and tribunals are not obliged to follow it, but guidance may be used as evidence in proceedings.

In September we reported on The Law Society's guidance about the use of confidentiality agreements (also known as 'non-disclosure agreements' or 'NDAs'). The Law Society's guidance aims to de-mystify NDAs for workers asked to enter into them, setting out ways in which one may be entered into and encouraging workers to seek independent advice if asked to enter one by their employer.

The Equality and Human Rights Commission (EHRC), which is charged with enforcing compliance with the Equality Act 2010, published non-statutory guidance in October which specifically looks at issues concerning NDAs in the context of discrimination ('the guidance').    

What does the guidance on the use of confidentiality agreements say?

The guidance gives useful information to both employers and employees about the particular complications of NDAs in relation to the Equality Act.

In particular, the guidance focuses on NDAs within employment contracts or settlement agreements that could stop workers and employees speaking out about acts of discrimination, harassment or victimisation in contravention of the Equality Act.

Whilst it is not obligatory for courts and tribunals to follow the guidance, it can be relied on as evidence at a court or tribunal of good or bad practice, so it is worthwhile for employers to take account of the guidance.

What are the key points of the guidance?

The guidance stresses the importance of employers clarifying and specifying what it is that they wish to make confidential. Effort should be made to avoid sweeping confidentiality terms as they run significant risk of being unlawful, even if this is not the intention (see below).  Employers must also avoid putting a worker or employee under duress to enter into an NDA, otherwise they run the risk of the NDA being unenforceable.

Emphasis is also given, in respect of resolving discrimination issues by way of settlement agreement, on ensuring the worker or employee receives independent advice and that, if the advice needs to be paid for, the employer covers the costs – including the costs of negotiation unless they are finalised through an ACAS COT3 agreement.

The guidance recommends that employers consider whether an NDA is actually needed as part of a settlement and that any confidentiality obligations placed on the individual should be mutually observed by the employer. In addition, employers are advised that an individual should not be asked to give warranties that they have no discrimination or whistleblowing claims as this could intimidate the individual into staying silent for fear of breaching the NDA and facing fines, penalties or even repayment of compensation.

The guidance also usefully reminds employers that a key defence to discrimination claims is for an employer to show that they took all reasonable steps to prevent the alleged act of discrimination from occurring. This means that, regardless of any settlement reached, allegations of discrimination should be addressed and attention should be given to any individual or wider workplace culture that has given, or could give, rise to discrimination claims. More generally, employers are encouraged to take appropriate institutional and governance steps to monitor the use of NDAs and ensure that they are being used appropriately and that sufficient board oversight of their use is in place.

Lastly, the guidance reminds readers that there are clear situations where the use of NDAs is unlawful – in instances of trying to prevent whistleblowing, the reporting of criminal activity, prevention of individuals complying with the law or requirements of a regulator or by enforcing confidentiality by use of penalty clauses in the event of the individual breaching the terms of the agreement.

Wrigleys' comment

This guidance will be especially useful for employers facing employees making discrimination allegations as they try to negotiate a path to a reasonable and enforceable agreement.

As is pointed out in the guidance, recent analysis of the use of NDAs suggests that they have been used in some circumstances to cover up 'the worst instances of discrimination'. Clearly not every NDA has this purpose or objective, but it is also clear from this guidance that their use can have the indirect or unintended effect of silencing individuals who, had they known the correct legal position, would have spoken out. Efforts by organisations such as the EHRC are designed to level the playing field and help individuals, and employers, to understand the legitimate uses of NDAs.