Stricter controls are needed to stop employers using non-disclosure agreements (NDAs) to cover up unlawful or criminal behaviour, MPs have said.
NDAs, often referred to as ‘gagging clauses’, are often included in contracts between employers and staff to prevent former employees making information public. However, a report published by the Women and Equalities Select Committee this week, ‘The use of NDAs in discrimination cases’, explored how they are often used to cover up unlawful discrimination and harassment in the workplace.
It also highlighted the difficulty of bringing a claim to the employment tribunal and the imbalance of power that can leave employees feeling they have little choice but to reach a settlement and sign an NDA. Often, employees find it difficult to find work in their sector again and suffer psychological and financial damage.
The committee called on the government to ‘reset the parameters’ to ensure NDAs cannot be used to prevent legitimate discussion and to stop their use to cover up unlawful discrimination or harassment. It wants board level managers to be required to sign off any NDA in discrimination and harassment cases.
It recommended ‘urgently’ improving the remedies available and the costs regime for tribunals. The report warned the tribunal system may be ‘too onerous for litigants in person with complex discrimination claims’ and called on the government to review what practical support is available.
It warned that ‘fears about being pursued for employers’ legal costs may be driving individuals to agree to settlement terms such as confidentiality clauses that they do not want which cover up unlawful behaviour.
‘This may be due to a lack of clarity around the costs regime, or to the use of potentially unenforceable threats by the other party or their lawyers’.
Beth Hale, partner and general counsel at CM Murray (pictured), said: ‘It's good news that the Committee is not demanding an outright ban on NDAs.
‘Instead, there is a real and welcome focus on clarity for all parties―it is vital that everyone understands what they are signing and what they are then permitted to do. The focus on reform of the employment tribunal system and making it more accessible (including extending time limits and reforming costs and fee structures)… is also welcome.’
Commenting on the proposals, NLJ columnist Dominic Regan, who was asked to advise on the costs considerations surrounding damages based agreements, said: ‘If introduced, a ban could deny the victim a substantial recovery. Offers to settle have been known to be drastically more than one would ever be awarded by way of compensation.’
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