“Cover-up culture”: NDA use in discrimination cases called into question

A report damning the use of non-disclosure agreements in discrimination cases has highlighted a ‘cover-up’ culture in many workplaces and urges the government to make changes to protect workers. We look at the rules, the possible changes – and how UK employers can minimise impact.

The Women and Equalities Committee (WEC) has published a report highlighting widespread use of non-disclosure agreements (NDAs) in discrimination cases, especially sexual harassment cases, criticising the “cover-up culture” of many workplaces.

The WEC, which scrutinises the Government Equalities Office, said that unlawful discrimination and harassment are “routinely covered up by employers” via the use of NDAs, calling the practice “completely unacceptable”.

Recommendations focus on a one-way cost shift to discourage the misuse of NDAs. 

_{The powers of non-disclosure agreements}

NDAs are often referred to as “confidentiality clauses”. They are also, more casually, known as “gagging orders” or “hush agreements”.

They’re an important part of employment law, as they prevent employees (current and past) from revealing company secrets, ideas and so on. These NDAs are usually signed when an employee is hired.

But NDAs are also often used when disputes, such as sexual harassment claims or wrongful dismissal, are resolved outside of a tribunal hearing.

What exactly they can cover can be somewhat of a grey area. While they do not stop people reporting alleged illegal acts, such as theft or assault, they may stop people reporting bullying or harassment.

That said, the government is planning to bring in legislation to protect workers from NDA misuse – making sure they cannot be stopped from reporting harassment or discrimination.  1

_{The WEC report}

The report comes after an inquiry into the use of NDAs in discrimination cases (link to employer defending claims page).

Recommendations to the Government included:

• Stopping the use of NDAs to cover up allegations of unlawful discrimination
• More clarity within settlement agreements
• Stronger corporate governance (link to coco corp gov page) to make sure employers protect the victims of discrimination and harassment
• Requiring named senior managers to oversee discrimination and harassment policies, as well as the use of NDAs in relation to them
• Increasing compensation for victims
• Requiring employers to pay legal advice costs for employees if the employer loses a sexual harassment case
• Increasing the time limit for bringing a claim to an employment tribunal

_{How will this impact employers?}

It’s not certain that these recommendations will be implemented. The UK government is currently bogged down in leadership elections and Brexit matters, so change could be slow – but Business Minister Kelly Tolhurst announced measures protecting workers from NDA misuse, so the issue is on the government’s radar.  Several recommendations could, if followed, have significant effect on UK employers. Particularly impactful would be:

• The requirement for employers to cover legal costs for victims who make successful claims. Discrimination cases can be extremely complicated and drawn-out, so the costs soon mount up.
• Higher compensation recommended for successful claims. These could include ‘Vento’ awards, which compensate victims for injury to feelings. ​

_{What should employers do?}

​Some employers will be concerned about this report – discrimination claims are not easy to deal with, and the one-way cost shifting could be costly.

Others will see this as progress, rather than catastrophe. The WEC’s recommendations of greater clarity surrounding whistleblowing legislation will leave less room for disastrous misunderstanding.

Either way, UK employers should note the way the wind is blowing. It’s time to clarify internal policies regarding NDAs (link to handbooks/contracts page), and to begin providing plain-English explanations to employees wherever they are used.

It’s also a good time to discuss which senior managers would oversee the policies and their implementation.

_{More information}

The constant changes in employment law is extremely complex and time-consuming and many HR managers and executives will be seeking legal advice in the wake of the WEC report. Pinney Talfourd is one of the leading employment law firms in Essex and London, specialising in the employer’s perspective. Please contact our Employment Team for a free no obligation discussion on how to deal with such cases within the confines of the law. ​      This article was written by Alex Pearce, Senior Associate in the Employment Law Team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of June 2019.