Gagging clauses are good

A tidal wave of public opinion is threatening to derail confidentiality agreements between employees and employers that can be in the interests of both.

Prime Minister Theresa May told the House of Commons in October 2018 that the government would act on employers’ alleged abuse of confidentiality or non-disclosure agreements.

The moral panic is about well-heeled and powerful bosses using a wad of cash to bribe and bully cowering employees into keeping schtum about how bosses victimized and abused them.

This comes in the wake of a revelation that a court stopped The Daily Telegraph from publishing details about a leading businessman’s bad behavior. It also follows the #MeToo furor about the Hollywood film mogul, Harvey Weinstein, using legally-binding agreements to keep film actresses quiet about his alleged abuse of them.

But is it that simple?

Settlement agreements

In employment, non-disclosure agreements can be part of a settlement agreement between an employee and an employer that settles a dispute. They usually occur when the employee is leaving the employer’s organisation with a financial payout.

Part of the agreement will typically state that the former employee cannot reveal details of the dispute, details of the agreement and often even the very existence of the agreement. A breach of the agreement can lead to legal action.

Yet, moral critics of such settlements are not telling the whole story. In fact, there is nothing stopping someone who signed an agreement from telling the authorities about the former boss’ illegal activities.

Whistleblowing protection is incorporated into employment law and protects disclosure by employees if it is in the public interest, done in good faith and carried out in a reasonable way. This protection cannot be surrendered or removed by any non-disclosure agreement – employees can take the money and still blow the whistle.

Sections 43(b), 47(b) of the Employment Rights Act 1996 protects an employee who reveals a criminal offence that has taken place at work or that an employer has failed to comply with legal obligations. Section 43(J) bans any agreement from preventing legally-sanctioned whistleblowing.

A settlement agreement is a very useful tool for compensating an employee in return for burying allegations against an employer. The agreement will only be binding if the employee has received independent legal advice from solicitors, who will advise on the merits of the agreement set against litigating the allegations. This means that victim employees will save big time on legal costs whilst still receiving compensation.

A binding settlement agreement with a confidentiality clause will serve the public interest in that employment tribunal cases are settled between the parties rather than by the courts – thus saving the public purse.