UK: Employment Reforms: Update on Non-Disclosure Agreements

Authors: Charles Urquhart, Corinna Harris, and Charlotte Stern

An update on the latest Government thinking on proposed changes to Non-Disclosure Agreements.

Last month we brought you the update that the latest version of the Employment Rights Bill included a proposal that would make Non-Disclosure Agreements (NDA) covering harassment and discrimination between an employer and worker void.   The Government had indicated it may allow some NDAs in an ‘excepted agreement’.

Since then, the Government Impact Assessment on the proposed change has been published.  This indicates that it’s likely that any regulations introduced would allow NDAs to be included in a settlement agreement if the NDA is requested by the worker.

Several commentators had pointed out that without the ability to include an NDA in a settlement agreement, employers may not be incentivised to settle complaints.  Addressing this, the Impact Assessment also states that “Given that the intention for the regulations is to ensure workers can still request NDAs the option for confidentiality remains and may preserve some of the incentive to settle.”

Parliament is now on its summer recess, so we will have to wait until September to find out more about the thinking on NDAs and on the Employment Rights Bill more generally.  As a reminder on what’s expected and when see here: New timeline published for UK employment law changes : Clyde & Co

Key Action Points for Human Resources and In-house Counsel

NDAs can be misused by employers to inappropriately prevent employees speaking up about their experiences, but as ACAS has pointed out in its responses to the Government, they are also useful tools and employers are likely to be less keen to settle cases if they cannot be used.  Were employers to be discouraged from settling, this would have a material impact on employment tribunals which are already flooded with claims.

We will have to wait to see the actual draft wording of the regulations but based on the Impact Assessment, it looks likely that there will be limited circumstances in which NDAs will be able to be used.