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Confidentiality Clauses and Non-Disclosure Agreements

Confidentiality clauses and non-disclosure agreements (NDAs) can serve very useful purposes in an employment context.  Such clauses are generally used in two ways; as part of the employment contract and as part of a settlement agreement to allow both employee and employer to move on from an employment-related dispute without recourse to the Employment Tribunal.

However, the use of confidentiality clauses and NDAs has received much criticism of late given concerns that they may be used to hide inappropriate, discriminatory or illegal behaviour, such as in cases of sexual harassment in the workplace, or to prevent the reporting of such behaviour to the proper authorities.

Currently, confidentiality clauses or NDAs are void if they prevent someone making a protected disclosure (also known as whistleblowing), or taking a case to a tribunal (unless the clause is within a COT3 or settlement agreement).

In the wake of recent cases exposing the misuse of such clauses, the government is now consulting on whether the take further legislative measures, including the following:-

  • Banning confidentiality clauses which purport to prevent a victim reporting or discussing potential criminal acts to or with the police
  • Requiring confidentiality clauses in employment contracts to be set out within the written statement of terms of employment issued at the start of the employment relationship
  • Ensuring confidentiality clauses clearly set out which disclosures are not prohibited by the clause, in default of which the entire clause would be void

Employers should consider reviewing any contractual provisions currently in place to protect confidential information and keep the following in mind; –

  • Employers with a particular issue of confidentiality may wish to consider seeking legal advice as to whether it would be beneficial to have a separate confidentiality agreement rather than including a standard confidentiality clause within an employment contract or settlement agreement
  • Employers should make it clear what employees are not prevented from disclosing; such as information that is already in the public domain
  • Employers should consider limiting the duration of a confidentiality clause rather than making it last forever
  • To avoid any implication that an Employer took unfair advantage of an employee, employers should consider having employees seek independent legal advice before signing an NDA and having the legal advisor sign a certificate to confirm that advice has been given. Clearly this is already part and parcel of signing a settlement agreement but employers should take advice if the clause falls outside of such a process.

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