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Non-disclosure Agreements in Employment Settlements – the Case for Remain

Mark Higgins comments upon the possible effect of the recommendation that NDAs should be banned or significantly curtailed.

There has been much protestation in recent months over the use of “non-disclosure agreements” (usually referred to as ‘confidentiality clauses’) in employment settlement agreements. Employers’ use of such devices, so the argument goes, gags employees in return for money, allowing them (the employers) to cover up their discriminatory activity and other misdemeanours.

In a recent article published by the Guardian (echoing the theme of a Commons Select Committee Report published in June) an anonymous contributor speaks of her workplace experiences of becoming pregnant, her time on maternity leave and the hostility that greeted her upon returning to work. Whether the case itself is real or fictitious is unclear but there is no doubt that it provides a text-book illustration of how some women have been treated by their employers over the years. However, the issue of discriminatory conduct by employers will not be resolved by banning a device that is a central component of settlements in all areas of legal dispute.

In the Guardian’s example, the story is related exclusively from the employee’s own perception that her employer’s conduct stems from the pregnancy itself. What if the real issue had been the employee’s poor performance prior to her pregnancy? What if a number of serious errors in the employee’s work had been uncovered while she was away? There may be an entirely legitimate reason for dismissing the employee but unless those reasons are aired in an employment tribunal and upheld, the suspicion will always point to pregnancy.

Employers are conscious of the assumptions that are likely to be made and it is for this reason that many are prepared to offer settlements – but only where there is some value in it for them. Aside the saving on legal costs, the main advantage of a settlement lies in the confidentiality that they can insist upon as part of the deal so that the employee does not make (or continue to make) or publish derogatory remarks about the employer having just pocketed a significant sum of money without having had to prove her case. Ban confidentiality clauses and you instantly remove a key motivation for an employer to consider early settlement. After all, who in their right mind would agree to hand over substantial settlement monies in the knowledge that the recipient is poised to trash your good name and reputation across social media?

“So what?”, you might say, “if they don’t settle early, the employee will simply drag them before a tribunal.” But for many (including the single-parent mum in the example), the cost of doing so places the option beyond their reach. It can cost circa £30,000 – £40,000 for a claimant to bring the average discrimination claim to full hearing and you don’t as a rule recover your costs in the event of success.

Confidentiality is a central component of the bargain in many settlements. Remove it and in one fell swoop the incentive for early settlement is taken away, forcing many employees to abandon their quest for justice.

This blog was written by:  Mark Higgins

DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assistance.