Confidentiality and the use of settlement agreements in discrimination cases

New EHRC Guidance on “The use of confidentiality agreements in discrimination cases” (“the Guidance”) will, we expect, result in changes to settlement agreements and established practice in this area.

While some of the recommendations are to be expected (ensuring no pressure to enter the agreement for example), other aspects of the Guidance are more novel. For example, if your organisation agrees an employee exit by way of a settlement agreement, would there still be an investigation into the allegation of discrimination? Is there a central record maintained of confidentiality arrangements in discrimination cases? These and the other key aspects of the Guidance are considered below.

Meantime, illustrating the continued interest around this topic, the government published its response to the Women and Equalities Committee (WEC) report on the use of non-disclosure agreements (NDA) in cases of unlawful discrimination and harassment. This response largely sets out the legislative proposals that were announced in July.

The Guidance

The focus of the Guidance is on the use of non-disclosure/confidentiality agreements (NDA’s) in settlement agreements (in cases involving discrimination allegations), with a short section addressing confidentiality clauses in employment contracts.

The recommendations: settlement agreements

• The use of confidentiality clauses
• The scope of the confidentiality clause
• The limitations of the confidentiality clause
• Employers should pay for the costs of employee’s legal advice even where an employee refuses to accept the deal
• Employers should consider investigating allegations of discrimination even where a settlement agreement is signed
• Employers should keep a central record of confidentiality agreements in settlement agreements

Contracts of employment

The Guidance also refers to the use of confidentiality clauses in contracts of employment where they are designed to prevent workers discussing discrimination that occurs in the future. In our experience such an approach would be unenforceable in any event.

The government response to the Women and Equalities Committee report

Whilst the government acknowledged that NDAs play an important part in the employment sphere, proposals for change were set out to strengthen the legal protections offered in this area. The Government rejected many of the requests by the Committee for a more radical reform of the law in this area.

The proposals reiterate what was announced in July 2019 i.e. that legislation will be introduced to:

• Restrict the use of NDA provisions in employment contracts and settlement agreements, principally to prohibit the silencing of victims of harassment and discrimination
• Prohibit NDA provisions preventing disclosure to certain groups including the police, health care professionals and lawyers
• Include a requirement that restrictions to NDAs are explicitly stated
• Ensure that individuals signing NDAs receive independent legal advice

New measures include:

• Future consultation to consider whether there should be a statutory obligation on employers to provide a basic reference with job title and dates of employment
• Assessing what options may be required to safeguard individuals where tribunal decisions are published online

The proposals are subject to parliamentary time and their implementation may be affected by the result of the upcoming general election. However, it is currently envisaged that ACAS and the SRA will issue guidance. The full report can be found here.

Impact of these changes?

Any confidentiality clause in a template settlement agreement should be reviewed now, in advance of the legislation coming into effect, setting out the limitations of the clause. Further changes will be required once we know the exact content of the legislative amendments.

While the EHRC Guidance is described as reflecting good practice, some of the content arguably goes beyond statutory minimum requirements and established practice. It highlights the increasing complexity in managing allegations of discrimination.