|The EHRC has published new guidance on the use of confidentiality agreements (“CAs”) in cases involving discrimination.
The new non-statutory guidance follows on from the Government’s response in July 2019 to its consultation on proposals to prevent the misuse of CAs.
It sets out good practice for employers and clarifies the law in this difficult area.
The guidance was published on 17 October 2019, and is effective immediately.
Whilst the guidance covers CAs used in employment contracts, the main focus of the guidance is on the use of CAs in settlement agreements in cases involving discrimination.
The guidance will have a potentially significant impact on the way settlement agreements are drafted in such cases and will make it much more difficult for employers to justify their use of CAs. The key points covered by the guidance are:
1. Is the CA necessary?
Employers should consider on a case-by-case basis whether a CA is needed. Where a template settlement agreement is used, CAs should not be included in the template as standard but only used as required.
The guidance sets out circumstances in which it may be appropriate for a CA to be used, and states that employers should weigh up the following factors when deciding whether to include a CA:
a) Whether there is a clear reason why a CA is needed
b) The benefit to the employer of including a CA
c) The impact of including a CA on the worker
d) The impact that using CAs may have on the culture of the organisation
e) The benefits of not using a CA
Where a CA is used, it should be worded to deal with “the particular circumstances of the case” and should not go beyond “what is necessary and appropriate” in those circumstances. The guidance recommends employers to take legal advice on the inclusion of a CA, and employers must inform workers why a CA has been used so that he/she can seek legal advice on whether its inclusion is reasonable. Any CA should be mutual.
2. Negotiations and taking legal advice
Employers should pay a worker’s reasonable costs of taking independent legal advice even if that worker does not end up signing the settlement agreement. The cost contribution should be sufficient to allow the worker to take independent advice on the terms of the settlement agreement as well as any CA, and to ask their adviser to seek changes to the CA if necessary.
Workers should be given a reasonable amount of time to seek advice and to consider the terms of a settlement agreement. Unless there are exceptional circumstances, this should not be less than 10 days.
3. Board level oversight and the “central record”
The guidance states that “large” employers (undefined), employers who use a significant number of settlement agreements and employers who operate across multiple sites should keep a “central record” of CAs in order to monitor any systemic discrimination issues. The central record should include when a CA has been used, what type of claim it was used for, who allegations of discrimination were made against, what type of CA was used and why the CA was used.
The board of directors (or equivalent) should have oversight of the central record and the use of a CA should be signed off by a director or delegated senior manager, who is, where reasonably possible, someone who was not involved in the act of discrimination or in hearing any grievance.
The board of directors (or equivalent) should ensure that policies and procedures require managers to escalate concerns about the workplace culture or discrimination.
4. Future claims
Employers should still investigate discrimination complaints and take any steps to address/prevent discrimination, even where a settlement is reached, in order to make use of the “reasonable steps” defence in any future discrimination claims.
Employers should take careful note of the guidance and may wish to review their template settlement agreements. Please contact us for further advice.
We are awaiting new legislation restricting the use of CAs (which was promised following the government’s response to its consultation on proposals to prevent the misuse of confidentiality agreements). When that new legislation is published, it is likely that this new guidance will need to be updated.
Note that the guidance is not a statutory code and an employment tribunal or court is not therefore obliged to take it into account. However, it may still be used in legal proceedings where it is relevant. It is therefore likely that, should an employer seek to rely on a CA at court, the question as to whether the employer has complied with the guidance will be relevant to questions of enforceability.