Non-disclosure agreements (NDAs), sometimes referred to as “gagging clauses”, are rarely out of the news.

Earlier this month, the Deputy Prime Minister, Dominic Raab, was asked in the House of Commons by an opposition MP if he “has ever entered into a non-disclosure agreement connected to a complaint against him”.

Mr. Raab’s response was to explain that there was an employment dispute which was settled before he entered the House of Commons (he became an MP in 2010).  He said that “it wasn’t an NDA but it did involve a confidentiality clause which was standard at the time”.

In this article we try to answer some of the questions posed by the exchange, which is available here on YouTube.

What is an NDA?

A non-disclosure agreement is exactly that; an agreement that a person or party will not disclose certain information to others.  They are used all the time in a wide variety of situations.

Want to share your plans for a new invention with a potential manufacturer?  Ask them to sign an NDA first, so you are protected against them using the idea themselves.  Want to buy a business but you don’t want the market or your competitors to know how much you paid?  Everyone involved can agree to keep it to themselves.

The trouble is that, for some, NDAs have become synonymous with the hushing up of abhorrent or even criminal behaviour in the workplace, particularly sexual harassment.

Is an NDA the same as a confidentiality clause?


Why do NDAs have a bad name?

As a consequence of the #metoo and #timesup movements, it became apparent that many of the victims had been prevented from speaking out because they had agreed to NDAs or confidentiality clauses.  As such, many consider such clauses or agreements unethical and some even say that they should be banned.

Why are NDAs used when there are workplace disputes?

There can be numerous advantages for both employer and employee.  Let’s say an employee chooses to complain about the way they have been treated at work or even brings an Employment Tribunal claim.  In broad terms, they have two options.

Option 1 – To not settle

The first option is to pursue the dispute to its conclusion, with a judge deciding who is in the right and the amount of any compensation which should be awarded.  All claimants have the right to take this option, with some very limited exceptions depending on the circumstances.  It’s also free to bring an Employment Tribunal claim.

However, claims can take several years and legal representation could come at a substantial cost.  The usual rule in the Employment Tribunals is that both parties pay their legal costs, whoever wins and loses.  This can mean the real risk of an aggrieved employee spending more on legal fees than they can hope to recover in compensation and ending up worse off financially, despite the win.  There is also the uncertainty of litigation and the chance that the individual will lose their claim or recover very little, no matter how wronged they feel.

A further complication is that all Employment Tribunal judgments are publicly available and some cases will generate press attention.  This can be unwelcome for both parties but unfortunately it can sometimes be more felt more acutely by individuals who can find that it’s more difficult to find work because of the publicity.  It is unlawful to refuse to employ someone because they have claimed discrimination previously but proving a connection between the two can be difficult and many will want to avoid being in the spotlight in the first place.

Nevertheless, there are a lot of employees for whom having their day in court is the most important outcome.

Option 2 – To settle

The second option is for the individual to reach an agreed resolution with their employer, on the condition that the business pays them a sum of money.

Once an agreement is reached, it brings for both parties an end to the time, cost and uncertainty associated with the dispute.  It usually means the employee can receive payment relatively quickly too.

In many cases, the amount of the settlement sum will be comparable to the amount that the individual would expect to receive if they won their claim or, if it’s discounted in any way then this tends to be for good reason and after both parties or their lawyers have negotiated it keenly.

In some cases, aggrieved employees in a particularly strong negotiating position can even get more compensation than a judge has the power to award them.  An employer might want to avoid the publicity and cost of a public fight and it’s possible for the claimant to seek settlement at a high amount for that reason.

Where do NDAs come into it?

When settlement is being considered, NDAs play an important part.

Because the parties want to resolve matters in full, they need to be sure that the dispute will not be resurrected in some way, for example on social media or in interviews to the media.  Settlement is often the best outcome for all and it is to be encouraged, but without such reassurances there would be little incentive for an employer to settle in the knowledge that it might not in fact draw a line under matters once and for all.

Yes, the parties would agree the conclusion of any litigation but that would be unattractive if the debate on the matter was to carry on anyway.  In such cases, in the absence of appropriate confidentiality clauses the employer could well be better off continuing to defend the claim and having the dispute resolved by a judge after a consideration of all the relevant evidence.

It’s also important to note that confidentiality provisions can take many different forms, with some information being available and some details kept hidden.  For example, we often see reports of a row being settled on the basis that an undisclosed sum has been paid.  Even though the employer is unlikely to be admitting liability, this approach can satisfy both parties in that the matter concludes and the details are kept confidential, whilst giving some indication that the individual has “won” by agreeing a payment.  Usually the parties will want to take care when crafting any agreed joint announcement too.

What did Dominic Raab mean when he referred to a confidentiality clause which was “standard at the time”?

We don’t know for sure but the answer might lie in the fact that NDAs have changed in the last five years and it would appear that Mr. Raab is referring to something that pre-dates his election as an MP in 2010.

In light of concerns about the misuse of NDAs which arose from the #metoo movement, the Solicitors Regulations Authority (SRA) issued notices to all solicitors between 2018 and 2020 about how they should be deployed in practice.

In summary, they said that confidentiality provisions must not be used as a means of preventing co-operation with a criminal investigation, reporting crimes, reporting misconduct to a regulator or making a public interest disclosure by blowing the whistle on illegal activity.  These exclusions are now standard.  We are speculating but it’s quite possible that a pre-2010 NDA did not include these exclusions.

In March 2019 the Government consulted over the use of confidentiality clauses. In its July 2019 response to the views submitted, it said that such clauses can serve a legitimate purpose in the context of the employment relationship but that using them to prevent victims from speaking out must be prohibited.  Further legislation was promised but has yet to be introduced.  This might be in part because the SRA’s instruction to solicitors has dealt with some of the concerns.