Non-disclosure agreements and confidentiality clauses: what is the government consulting about?

The government has announced that it is consulting about the use of confidentiality clauses in settlement agreements and contracts of employment.

The government has announced that it is consulting about the use of confidentiality clauses in settlement agreements and contracts of employment. The restrictions which it is considering are primarily designed to limit the use of such clauses where sexual harassment has been alleged, but they will have implication for all types of confidentiality provision, including those which are routinely included in employment contracts.

It is already the case that confidentiality clauses cannot be used to prevent whistleblowing disclosures, but the government is proposing to extend this rule to disclosures to the police and some other organisations, even if the requirements of the whistleblowing legislation are not met. It also proposes that confidentiality clauses should list these exceptions, so that they are clear to the person who enters into the agreement.

The most dramatic proposal being considered would provide that any confidentiality clause which fails to specify the circumstances in which is unenforceable would become void in its entirety, even if the situation being litigated is one in which it would normally be enforceable. Such an outcome would give increased importance to the careful drafting of settlement agreements to ensure that they comply with the legislation. Small sums could also be awarded by the Employment Tribunal where employment contracts fail to meet the relevant requirements, but it is not currently proposed that these clauses would actually become void. 

If the consultation does lead to any legal changes, it is unlikely that they will apply to contracts which were entered into before the introduction of the legislation. However, it is already advantageous to draft clauses so that the limitations to their effectiveness are transparent. In the recent case of ABC v Telegraph Media, the Court of Appeal upheld an injunction preventing the media reporting of harassment allegations, partly because the non-disclosure agreement relied upon set out precisely when its provisions would not apply.