The Equality and Human Rights Commission (EHRC) has issued new guidance on the use of confidentiality agreements (often referred to interchangeably as “non-disclosure agreements” “NDAs”, “gagging clauses” or “confidentiality clauses”) in discrimination cases. The stated aim of the guidance is to “clarify the law on confidentiality agreements in employment and to set out good practice in relation to their use”.

The first thing to note is that the guidance is just that – guidance. It is not a statutory code of practice and, as such, employers cannot face a standalone claim if they fail to comply with it. Employment Tribunals are also not obliged to consider it when dealing with a claim under the Equality Act 2010. This is clearly not to say that employers should ignore it; it has after all been issued by the statutory body that is responsible for encouraging equality and diversity, but it means that a failure to comply with all its good practice recommendations will not be fatal, or necessarily even harmful at all.

The guidance highlights the legal position (or at least what it will be once the government introduces the new legislation on the use of confidentiality clauses – see below) in relation to the use of confidentiality agreements in contracts of employment and settlement agreements. The key points being that confidentiality agreements cannot be used to stop a worker blowing the whistle; reporting misconduct or a serious breach of regulatory requirements to a regulatory body; reporting a criminal offence or cooperating in a criminal investigation; doing anything that may be required by law (e.g. giving evidence to a court or tribunal) or by reason of a regulatory duty.

It also contains a number of good practice recommendations, designed to help reduce the potential for confidentiality agreements to be misused or overused. The key recommendations in relation to settlement agreements can be summarised as follows:

  • Consider on a case-by case basis whether a confidentiality agreement is needed. If you use a template settlement agreement, do not include such clauses as standard, but only add as required.
  • Each time you consider including a confidentiality agreement in a settlement agreement, weigh up the following factors:
    • whether there is a clear reason why a confidentiality agreement is needed
    • what the benefit to the employer of including the confidentiality agreement would be
    • the impact of the confidentiality agreement on the worker
    • the impact that confidentiality agreements may have on the culture of the organisation
    • the benefits of not using confidentiality agreements
  • Inform the worker why you have formed the view that a confidentiality agreement should be used
  • Monitor use of your confidentiality agreements, e.g. consider keeping a central record so you can monitor potential systemic discrimination issues in the organisation
  • To ensure that confidentiality agreements are not being misused or overused:
    • the employer’s board of directors (or equivalent) should have oversight of the central record of confidentiality agreements
    • the use of a confidentiality agreement should be signed off by a director (or equivalent) or by an appropriate delegated senior manager
    • confidentiality agreements should, where reasonably possible, be signed off by someone who was not involved in the act of discrimination or in hearing any grievance related to it
    • the board of directors (or equivalent) should ensure that policies and procedures require managers to escalate concerns about the workplace culture, systemic discrimination or repeated or highly serious acts of discrimination by one individual

It is interesting that the EHRC has issued this guidance before the government publishes the draft legislation that will introduce new requirements governing the use of confidentiality agreements in contracts of employment and settlement agreements. Having said that, the EHRC has clearly had the government’s proposals in mind when drafting the guidance and its summary of the law reflects broadly what we understand the legal position will be as and when the regulations are introduced.