Employers are inclined to keep all information relating to their business and employment relationships as confidential as possible, particularly when those relationships break down and come to an end. But how easy is it to keep an ex-employee quiet? Nick Benson, a consultant solicitor at Arbor Law, which provides employment law advice for businesses, answers that question.
UK law (English, Welsh and Scottish) has always recognised the employment relationship as a contractual one, supposedly a mutual contract, with work and pay being the main forms of consideration. And just as the relationship is struck by contract, so it can be terminated by contract (this is often called a compromise or settlement agreement). Confidentiality is often covered in employment contracts and termination contracts, and the laws of contract allow contractual provisions to be as comprehensive and detailed as the parties wish.
Here lies the rub. Non-disclosure and confidentiality agreements are useful and reasonable, when struck between parties with relatively equal bargaining power, but employers and employees rarely have equal bargaining power. Consequently, the confidentiality provisions in employment contracts and termination contracts tend to favour the employer. Over recent years, HR professionals, trade unions and regulatory authorities have become concerned that the confidentiality provisions in termination contracts may be used to keep matters of public concern hidden.
Legislation v contract law
Over the last sixty years, a lot of legislation has been enacted to ensure that certain subjects are dealt with in an employment contract (e.g. working time, pay and holiday entitlement) and to provide employees with other rights, beyond their contractual rights (e.g. potential claims for unfair dismissal and discrimination).
In most cases, the legislation states that the relevant rights cannot be waived or avoided in a contract, (a “no-contracting-out” provision), (e.g. see Section.203(1) Employment Rights Act (ERA)1996 and Section.144(1) Equality Act (EQA) 2010).
Extra protection for whistleblowers
HR professionals and Employment lawyers are all aware that the Public Interest Disclosure Act 1998 protected whistleblowers from detriment during their employment (S.47B ERA1996), and from dismissal because of a protected disclosure (S. 103A ERA1996).
But they’re not all aware that the Public Interest Disclosure Act 1998 also contained a “no-contracting-out” provision. This appears at S.43J ERA1996, and it makes void any provision in any agreement between a worker and his employer (including an employment contract and a termination contract) which purports to preclude the worker from making a protected disclosure.
A “protected disclosure” means a “qualifying disclosure” made by a worker in accordance with any of sections 43C – 43H, e.g., to a prescribed person, including the police or other relevant regulatory authority (S. 43A ERA 1996).
A “qualifying disclosure” means a disclosure of information which, in the reasonable belief of the worker making the disclosure, is made in the public interest and tends to show that one or more of the following has occurred, is occurring or is likely to occur: a criminal offence, a failure to comply with a legal obligation, a miscarriage of justice, endangerment of an individual’s health and safety, damage to the environment, deliberate concealment of one of the above (S. 43B ERA 1996).
So, how are termination contracts made effective?
Since enactment of the Trade Union Reform and Employment Rights Act 1993, the “non-contracting-out” provisions of the legislation, now contained in the ERA 1996 and the EQA 2010, have been qualified so that termination contracts are effective, if in the form of an ACAS conciliated COT3 Agreement or a written settlement agreement, which identifies the particular rights/claims being settled, and which identifies the employee’s independent, insured, legal adviser.
And how are confidentiality clauses now governed?
ACAS uses a standardised confidentiality clause in its COT3 Agreements and recommends the same in a template settlement agreement, which is published on its website and available for free. The clause provides that the parties will keep the existence and terms of the agreement confidential but states “for the avoidance of doubt, this clause does not affect the employee’s right to make a public interest disclosure within the meaning of Part IVA – Protected Disclosures of the ERA 1996”.
Solicitors in all parts of the UK have received warning notices from the Solicitors Regulation Authority (SRA) in 2018, updated in 2020 and 2024.
Firstly, these notices have reminded solicitors of their professional duty to act with integrity and of prohibitions in their professional code against misleading their clients, the court or others, by their own acts or omissions or by allowing or being complicit in the acts or omissions of others, and against abusing their position by taking unfair advantage of a client or others (my emphasis).
Secondly, the notices have pointed out that a solicitor could be in breach of their professional duty and the professional code if they forget to tell an employee client about S.43J ERA 1996 or the ACAS recommended wording of a confidentiality clause. They are also in breach if they tell or indicate to an employee client that a catch-all confidentiality clause cannot be challenged, or if they advise an employer client to insist on a catch-all confidentiality clause.
Lastly, the notices go further than S.43J ERA 1996 and state that a solicitor should not advise on or be party to any confidentiality clause or non-disclosure agreement which prevents or deters (a) disclosure to any regulator or law enforcement body, (b) any disclosure required by law, (c) any proper disclosure to a professional adviser who is bound by a duty of confidentiality (e.g. legal, tax, medical), or any agreement which contains warranties, indemnities or claw-back clauses in a way that intends to or has the effect of improperly preventing any permitted disclosure or reporting.
So, in reality, ex-employees can decide whether or not to disclose the objectionable behaviour of their former employers. Many will decide to keep quiet, for their own legitimate reasons. Any provision, in a termination contract, which prevents or deters disclosure will be void and may prove to be an embarrassment in addition to the disclosure itself. Any legal adviser who drafts or accepts such a provision may be in breach of their professional ethics.
Extra restrictions for higher education
The previous government introduced the Higher Education (Freedom of Speech) Act 2023, to protect freedom of speech and academic freedom and to prohibit “no platform” policies at UK universities. The Act includes provisions (S.A1 (11) and (12)) which prohibit and make void any non-disclosure agreement between a university and anyone who makes a complaint about sexual abuse, sexual harassment, sexual misconduct or any other form of bullying or harassment.
Extra restrictions for all?
According to recent press reports, some members of the current government want the Employment Rights Bill to extend the new higher education restrictions to all places of employment or to include a general ban on confidentiality clauses in all termination contracts. We shall all have to watch this space.
If you want expert legal advice on how to draw up fair, compliant confidentiality agreements, contact Arbor Law today.