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Do confidentiality clauses still have a place in modern settlement agreements?

Posted
December 13, 2022
Employment Law

In recent years, the use of so-called NDAs in relation to the settlement of alleged harassment and bullying claims has proved controversial. But why has this issue hit the headlines again in the last few weeks?

Bullying back in the spotlight

Newspapers and news bulletins have been awash with stories about Dominic Raab (the current Justice Secretary), in which it is claimed that he has been accused of bullying members of his staff. What’s more, a number of similar historical allegations have come to light, including some which date back as far as 2007; at the time, Mr Raab worked as Chief of Staff in the office of David Davis MP. The alleged victim was offered a compromise agreement (nowadays called a settlement agreement) in order to settle her potential claims. The agreement included a confidentiality clause. In all likelihood, the clause would have been drafted in such a way as to require the individual to refrain from disclosing the terms or existence of the settlement agreement, as well as any of the circumstances giving rise to it.  

When questioned about the terms of the compromise agreement in Parliament, Mr Raab stated that the agreement contained a “confidentiality clause which was standard at the time”. Eyebrows were raised, but is there anything unusual about all of this?  Frankly, the answer is ‘no’.

When a dispute arises, regardless of the rights and wrongs of it all, sometimes it is in the interests of both employer and employee for the matter to be resolved by discussion and negotiation. In such cases, a payment is routinely made to the employee in return for the full and final settlement of any related claims. Consistent with the finality of the deal, often both sides agreed to keep the matter confidential. In the vast majority of cases, the arrangement is in the interests of both sides and rarely proves to be controversial. Interestingly, in the Raab case from 2007, the alleged victim had no wish to see the matter come to wider public attention and she expressly objected when newspapers tried to peddle the story back in 2011. 

Exceptions to the rule?

In our experience, the sorts of confidentiality clauses (sometimes called NDAs) which are routinely included in settlement agreements do not give rise to any particular difficulties in most cases. As a result, much of the criticism levelled at the use of such clauses is, in our view, misplaced. Indeed, in the absence of such clauses, it is possible that settlements may be more difficult to negotiate, which would often be to the detriment of both employers and employees. Nevertheless, there will be some relatively exceptional cases in which the use of more extreme forms of confidentiality clause will be inappropriate, particularly if it seeks to prevent people from reporting criminal activity or other serious wrongdoing.  

A warning notice issued by the Solicitors Regulation Authority provides guidance to solicitors on the drafting of confidentiality clauses of this sort. In the light of this guidance, nowadays, most settlement agreements make it clear that the obligation of confidentiality does not impede the individual’s right to report criminal or illegal activity, or otherwise make disclosures as required by law. In most cases, we believe this strikes an appropriate balance between the rights of the employer, the employee and the public more generally. But what do you think? It’s a sensitive issue on which people can quite reasonably disagree. What is your take? We’re interested to hear your thoughts.

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