Challenging Non-Disclosure Agreements in discrimination cases

In the fall-out from the ‘Me Too’ campaign, one of the more controversial legal practices, namely the use of non-disclosure agreements (NDAs) in discrimination cases, is under close scrutiny, not to say heavy criticism.

The Women and Equalities Committee of the House of Commons, has produced its, strongly worded, Report this week, which roundly condemns the use of NDAs, & makes wide-ranging recommendations. If adopted, these will have a significant impact on the management of discrimination cases.

In its summary, the Committee does not pull its punches! It states:

‘It is completely unacceptable that allegations of unlawful discrimination and harassment in the workplace are routinely covered up by employers with legally drafted on-disclosure agreements (NDAs). It is clear that in some cases allegations of unlawful discrimination are not investigated properly – or at all – by employers.

‘The difficulties of pursuing a case at an Employment Tribunal, and the substantial imbalance of power between employers and employees, mean that employees can feel they have little choice but to reach a settlement that prohibits them speaking out. Our Report shows unequivocally that in many cases signing a non-disclosure agreement is not benign’.

Plainly this stance chimes with considerable media commentary over recent months suggesting an unhealthy link between NDAs, and delays in uncovering unlawful discrimination which needs to be tackled, The core allegation is that all too often NDAs enable such issues to be swept under the carpet.

However, whilst at first sight a laudable concern, other commentators point to the need for this to be weighed against the public interest of NDAs, in enabling litigants to settle their disputes and avoid an expensive, and traumatic, public Hearing which neither side wants, and which carries reputational risks for both sides.

Doubtless there will be much debate on where the line should be drawn, in drafting likely legal constraints on NDAs, As a starting point for that debate, the Report contains many wide-ranging recommendations, including the following:

1. Increase the time limit for bringing a discrimination claim in the Employment Tribunals from 3 to 6 months.
2. Require employers to pay the cost of employees seeking legal advice, and of negotiating the terms of a proposed settlement agreement, regardless of whether the agreement is eventually signed.
3. Massively increased damages for non-pecuniary losses (i.e. the so called ‘Vento guidelines’ on appropriate compensation for ‘injury to feelings’ in discrimination cases).
4. Require standard, plain English, confidentiality clauses in settlement agreements.
5. Strengthen corporate governance requirements, to require employers to meet their responsibilities to protect those they employ from discrimination and harassment;
6. Specifically, require named senior managers (not HR), at Board level, to oversee anti discrimination and harassment policies, and the use of NDAs.
7. Consider one-way cost shifting, so the employer is more likely to be ordered to pay the employee’s costs, in a successful claim.

Despite the priorities of Brexit, this is not a subject which is likely to die away, or be side-lined. Therefore employers will need to be live to the implications of likely constraints on the use of NDAs in such cases, and be encouraged to tackle discrimination issues more promptly, and thoroughly, than may have happened to date. The more sensitive the issue, the greater the importance of no longer burying the problem in a carte blanche NDA , which might in future be open to challenge, or even set-aside.