The problem with banning NDAs in employment

The draft legislation provides for exceptions that have not yet been specified, but in principle, it would prevent employers and workers from agreeing to settle potential employment claims on terms including any non-disclosure agreement (NDA). This is usually done under a settlement agreement.

The proposal has the laudable aim of preventing employers from covering up allegations of sexual harassment. It has been greeted enthusiastically by campaigners, who are rightly determined to stamp out cases where such allegations are suppressed under an NDA, allowing those accused to get away with it and carry on making money for the business.

The general feeling among employment lawyers is that this is a counter-productive measure. Already, settlement agreements are only binding when the employee has taken independent legal advice (which the employer usually pays for), and solicitors are compelled by guidance from the Solicitors Regulation Authority to ensure that NDAs are not improperly used. That system generally works well to ensure that the oppressive NDAs of old are now quite rare.

There is no doubt that for employers, one of the most attractive features of settlement is to keep the circumstances confidential. However, confidentiality is good for victims too. Many victims of bullying, discrimination, or sexual harassment want to get justice by having their day in court. In my experience, even more people want to move on from the experience, and the employment where it happened. For that, they need money and confidentiality. The money allows people to sustain their income while they take time off to recover and look for a new job (and it often comes with a sense of justice). The confidentiality enables them to leave the experience behind.

Getting one’s day in court is distressing, expensive, and uncertain. The harasser’s defence will often be toxic and accusatory, and sometimes it can be successful. All of that is made much worse by the massive backlog of cases in UK Employment Tribunals. It is not uncommon for claims to take two years to reach a final hearing and many take longer still. Instructing a solicitor will dramatically increase the chances of success but also the cost. Settlement is usually the best option and if the government get this wrong, it will soon become much less attractive to employers. Litigation, with all its expense, distress, and uncertainty, will be the only option. The majority of victims, who can’t afford to instruct employment lawyers, will be hugely disadvantaged.

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Mark is a senior associate in the employment team at Kingsley Napley who acts for employers and senior individuals. He advises employees who have been dismissed or discriminated against and employers who are dealing with difficult and complicated employment disputes.