Misuse of confidentiality clauses

The Government says it recognises that confidentiality clauses have a right and proper place in the employment context: as part of employment contracts, to protect trade secrets for example, and as part of settlement agreements, for example to allow both sides of an employment dispute to move on with a clean break.

There are already legal limitations on confidentiality clauses; for example, they cannot prevent an employee making a protected disclosure or ‘whistleblowing’, and they cannot ordinarily prevent a person taking a matter to an employment tribunal (unless this right is waived through a settlement agreement).

The Government says there is evidence that despite these protections, confidentiality clauses have been used unethically to suggest that victims of harassment cannot make any disclosures and intimidate them into silence when they have faced harassment or discrimination.

The consultation has sought views on what further limitations might be put on confidentiality clauses to ensure they cannot be misused in this way or to clarify what they can and cannot cover.

The Government proposes to make it clearer to workers that they still maintain some disclosure rights even when they sign a confidentiality clause by requiring that confidentiality clauses clearly set out their limitations, either in settlement agreements or as part of a written statement of particulars, so workers know the rights they have when they have signed one.

For a settlement agreement to be valid, the worker must have received independent advice and the Government is proposing to extend this requirement to ensure the worker receives advice specifically on any confidentiality provisions within the agreement, and its limitations.

The consultation also considers how to enforce the proposed requirement on wording of confidentiality clauses. It has been proposed that where a confidentiality clause in a settlement agreement does not meet new wording requirements, it will be void in its entirety – to encourage employers to ensure they draft confidentiality clauses correctly. For confidentiality clauses in employment contracts, the existing tribunal enforcement mechanism for failure to provide a written statement of particulars would be extended to the new requirements to explain the limits of confidentiality clauses.

The consultation closed on 29 April 2019. In view of the more pressing issues on the Government’s agenda, it is unlikely we will see draft legislation particularly soon – but changes are expected. We do not yet know whether new legislation would apply to clauses drafted before the changes take effect but which the parties seek to enforce after the changes have been implemented. Employers should keep an eye out for draft legislation and consider reviewing the terms of their template documents.

If you require further information, please get in touch.