On 11 June, the House of Commons’ Women and Equalities Committee published its report entitled ‘The use of non-disclosure agreements in discrimination cases’.

 

What are Non-Disclosure Agreements?

NDA’s are otherwise known as confidentiality agreements. An NDA usually includes an agreement to make a payment to an employee, in return for their agreement to keep the terms and circumstances surrounding the agreement confidential. They can be a useful tool for both employers and employees, to ensure that matters are kept confidential and they are used to prevent reputational damage to both parties. NDAs are also often used to avoid costly and stressful litigation.

 

The Women and Equalities Committee

The Committee launched their inquiry in November 2018, due to ongoing concerns and fears that some allegations of sexual harassment are being dealt with using settlement payments and agreements preventing employees from speaking about the alleged behaviour. The inquiry was also launched in the wake of the ‘Me Too’ campaign and the press outrage that surrounded the Court of Appeal finding in favour of Philip Green with respect to an NDA which prevented the publication of allegations relating to his conduct.

The Commons’ Women and Equalities Committee stated that they wanted to see whether the picture was a similar one, for people who have suffered other forms of unlawful discrimination and harassment. Maria Miller, chair of the Women and Equalities Committee said the current use of NDAs in settling allegations of harassment is “at best murky” and sometimes “a convenient vehicle for covering up unlawful activity with legally sanctioned secrecy”.

 

Findings

The Committee found that there was often poor employer handling of other types of discrimination and harassment cases. They set out their concerns about the imbalance of power between employers and employees, suggesting that this is one of the key drivers behind the widespread and commonplace use of NDAs in the settlement of discrimination cases.

The report goes into some detail about why there may be an imbalance of power, by explaining that employers set and oversee company policy and grievance processes, and therefore have control over the investigation and handling of any discrimination complaint. As a result, they retain any information that is obtained as part of that process and can choose how much, if any, they share with the complainant. In addition, if litigation is being considered as a possible option, employers will tend to have greater familiarity with the employment tribunal system and easier access to legal advice and expertise than employees. Larger employers, in particular, may have ‘deeper pockets’ and therefore a greater ability to fund litigation, employ experienced employment lawyers and drive negotiations by choosing when to make settlement offers, how much to offer and what to include in suggested terms.

According to the report, some employees also do not pursue their case at the employment tribunal due to cost and time pressures, and this means some feel they have little choice but to sign a confidentiality agreement.

The Committee also set out their worry that secrecy about allegations of unlawful discrimination is being traded for things that employers should be providing as a matter of course eg references and remedial action to tackle discrimination.

Another concern related to the online publication of tribunal judgments, with the Committee observing that this increases the risk of claimants being blacklisted by future employers, and is a significant barrier to potential claimants bringing discrimination claims.

 

Conclusions and recommendations

The report contains many recommendations, which include:

  • Extending the time limit to bring a claim in the Employment Tribunal from three months to six months in cases where sexual harassment, or pregnancy or maternity discrimination is alleged.
  • Improving the remedies that can be awarded by employment tribunals as well as the costs regime to reduce disincentives to taking a case forward. Increasing the damages for non-pecuniary losses (the so-called ‘Vento Guidelines’) for injury to feelings in discrimination cases. Substantially increasing compensation – to both compensate the successful victim and “punish” employers, presumably in the expectation that businesses will stamp out cultural problems in their workplaces if their bottom line is affected.
  • Employers to make a financial contribution to cover the costs of a worker’s legal advice on any settlement agreement proposed by the employer. Where the worker wishes to negotiate the terms of those clauses, further contributions should also be payable by the employer to cover the costs of legal advice and representation for those negotiations. These contributions should be payable regardless of whether the employee signs the agreement.
  • Ensuring employers appoint a named senior manager at board level or in a similar position to oversee anti-discrimination and harassment policies and procedures in addition to the use of NDAs in discrimination and harassment cases.
  • Strengthening corporate governance requirements on all companies – requiring them to meet their responsibilities to protect those they employ from discrimination and harassment.
  • Requiring employers to investigate all discrimination and harassment complaints regardless of whether a settlement is reached.

 

The future?

The report will be welcome news for many, and in particular employees, to draw attention to possible misuse of NDAs in an employment context. The subject of NDAs has been a “hot topic” in the press over the last couple of years, so it is certain that the recommendations found within the report will be the subject of much debate going forward. A lesson from the report is that employers need to take care when considering using an NDA in a discrimination context, as the NDA could be open to challenge in the future. This is certainly an area to watch, and it will be interesting to see whether, and to what extent, any of the recommendations are implemented.