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Confidentiality Agreements: A Necessary Evil?

24 Apr 2019

‘Hush Money’ and ‘Contracts of Enforced Silence’ are two of the more critical labels used to describe confidentiality agreements; ‘Necessary evil’ and ‘Fact of life’ are others.

The last 18 months or so has seen the spotlight being turned on confidentiality agreements.  In the last few days, a BBC report has high-lighted their prevalence within UK Universities, with an estimated £87m being paid under settlement agreements which contain confidentiality agreements since 2017. 

In March, the Government announced a formal review of their use, and launched a formal Consultation ‘on measures to prevent misuse in situations of workplace harassment or discrimination’. The Consultation closes at the end of April.

But is the use of confidentiality agreements, always to cover up some (corporate) wrongdoing?  Many years of experience advising at the coal-face of employee relations has shown me that it is not.

While the employment relationship is nearly always one of unequal bargaining power, the position is often more nuanced during and at the end of an employment relationship.

I can’t provide a detailed statistical analysis, for every time I may in the past have been asked to include a confidentiality provision to ensure that the employee will not repeat allegations which the employer considers (reasonably in my view based on what I know) not to be true, and which would cause damaging to its commercial interests and/or reputation if repeated. However I can think of instances where there have been difficult circumstances between employees (sometimes an employee and their manager, but also between peers) where despite attempts at resolution through formal and informal internal processes, serious and potentially very personal allegations are being made about the conduct and behaviour of employees. 

Tit for tat complaints can give rise to situations where an employer is caught between employees, or groups of employees, each of whom is claiming to have right on their side (whether as those alleging unfair treatment because of disability or some other personal characteristic protected under the Equality Act, or making a ‘disclosure’ which they claim affords them protection as ‘whistle-blowers’).

This is not to belittle or deny the importance or properly trying to deal with those claims, and of dealing severely with clear-cut cases.  The difficulty, as usual, is in being able to distinguish between different situations.  Employment law has for the last 50 years been used as a key way to achieve social change, particularly in terms of our attitude towards one another. 

The Equality Act 2010 (and its predecessor anti discrimination statutes) radically, but rightly (in my view), provided for potential personal liability on the part of individuals.  We would say that if someone sexually assaults a work colleague they should be dealt with firmly, and in many cases would expect them to lose their job (and the economic stability that goes with it). 

But what about the manager who is genuinely trying to apply a performance management or disciplinary process against an employee, and are then accused of unlawful discrimination?  The manager is mortified, not only to find that they are being accused of abhorrent behaviour, but also that they are a potential defendant in a Tribunal claim.  Indeed, it is sometimes those individuals who will argue against any settlement being reached with the individual, as it is morally wrong to pay someone who seeks improperly to use the law to their advantage.  In those cases, the fact that the parties are to keep what has occurred confidential can be of considerable importance in trying to draw a line under what has been alleged. 

These cases are difficult, but that does not mean that resolution is not required.  A key aspect of our legal system is to allow for the orderly settlement of disputes, as an alternative to individuals seeking to take matters into their own hands.  To suggest that all confidentiality provisions should be banned in certain types of case, is unlikely to lead to improved confidence in the process of resolving disputes in the workplace. Whether various suggestions, such as keeping a register of where confidentiality agreements are used, or requiring greater regulation (with more involvement of lawyers), is the answer is hard to call; no system will be perfect.

As many of those working in both HR and employment law on a day to day basis will appreciate that, as ever, the truth is often more complex than the headlines belie.

As part of our popularAnnual Strategic Conference held on Thursday 23rd May, our DMH Stallard Employment Team alongside a range of guest speakers, will explore the practical aspects and processes around confidentiality agreements, and the considerations to make when faced with serious allegations that have been made about senior staff members. See further information here, including booking details.

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