Settlement agreements, confidentiality clauses and non-disclosure agreements: are they all bad?
Both confidentiality agreements and non-disclosure agreements (NDAs) have received a lot of bad press recently, however, their inclusion in employment related settlement agreements are both very common and very useful.
A settlement agreement is a contractually binding agreement between an employee and employer which is used to end the employment relationship. A settlement agreement will settle any claims or potential claims that an employee has, or may have, against an employer. Confidentiality over the terms of the agreement and the situation which lead to it is almost always vital. Without it the employer may decide entering such an agreement is not worth-while. If there has been a dispute between the employee and employer the confidentiality clauses will seek to keep that dispute confidential.
The controversy surrounding settlement agreements largely stems from the press coverage of the likes of Harvey Weinstein, and the use of them to silence people who have been the subject of criminal acts. Liverpool University provides another example where employees were forced to sign settlement agreements to cover up and silence serious misconduct. A large part of the problem with settlement agreements is the disparity in power between the parties.
The fact is that settlement agreements do not prevent an employee from making a protected disclosure (commonly known as whistleblowing) or reporting a crime. If the way that a settlement agreement is worded implies that an employee is excluded from making such disclosures, then it is likely the employee will continue to act as if they cannot make such disclosures, therein lies the problem.
To try and combat the abuse of NDAs/settlement agreements, the government has launched a consultation which aims to gather evidence and views in an employment context to allow such agreements to be used correctly.
The main focus of the government reform appears to be ensuring that the parties are well informed when they sign up to these agreements and that they are under no illusion as to what they can and cannot say. The focus is on the clarity of information received.
Going forward it is likely that settlement agreements will need to be clear, proportionate and express explicitly that protected disclosures (whistleblowing), and disclosures to the police, can still take place. A code of practice may be developed to ensure consistency and it is clear that there will be a greater onus on legal advisors to ensure employees signing these agreements fully understand their rights and obligations.
GA Solicitors has a great deal of experience in advising both employers and employees on the use and terms of settlement agreements. You can call the team on 01752 203500 or use our online form to get in touch.
Rob Zacal, employment solicitor, partner