Settlement agreements and confidentiality clauses
Employment settlement agreements inherently include confidentiality clauses. The use of confidentiality clauses, or sometimes called “gagging” clauses has recently received bad press, particularly in the light of recent high profile cases, involving alleged sexual harassment, that have been the subject of significant media interest.
Other terminology often used in the media to describe confidentiality clauses is “non-disclosure agreements”. This terminology originates from commercial contracts and has found its way into agreements used in the employment context.
More commonly, confidentiality agreements in the employment context are found as contractual clauses in settlement agreements, employment contracts and dispute resolution agreements executed via ACAS known as “COT3” agreements.
On 4th of March 2019, the Government launched a consultation on the use of confidentiality clauses and non-disclosure agreements. In this blog, I am therefore taking a look at confidentiality clauses and their use in settlement agreements.
An employment contract will often contain a clause requiring employees to keep matters they come across at work confidential. Employers generally have legitimate reasons for this – for example protecting trade secrets, protecting personal data and indeed compliance with data protection laws. In any event, contracts of employment have implied duties on employees, including a duty of fidelity and good faith and to maintain trust and confidence in the employment relationship.
Confidentiality clauses are an essential part of settlement agreements. The existence of these clauses in settlement agreements provides employers with the certainty that they can draw a line under the dispute matter. It is also an opportunity to reaffirm certain confidentiality duties that existed during the employment and remain on-going after the employment ends.
There are some safeguards in place to protect employees. For example, confidentiality clauses cannot be used to prevent or deter an employee from reporting whistleblowing disclosures or serious regulatory misconduct or reporting an offence to law enforcement agencies or cooperating with criminal investigations.
Confidentiality clauses can be enforced by means of High Court injunctions, and penalties for breaches can include damages for losses as a result of the breach, and the recovery of the legal costs of enforcement.
In its consultation, the Government reports that the evidence alludes that “some employers have used confidentiality clauses to suggest victims of harassment cannot make any disclosures and intimidate them into silence when they have faced harassment or discrimination”. The consultation is looking to understand how confidentiality clauses work in practice and assess the changes necessary to better protect individuals from their misuse.
This blog was written by Ashok Kanani, employment solicitor and business owner of Remedy Solicitors, a specialist employment solicitor legal practice based in central London and Wimbledon. We have expertise in advising on settlement agreements and employment law matters. Call us on 020 8286 1693 or email: firstname.lastname@example.org