Misuse of confidentiality clauses – Is it time for reform?

Misuse of confidentiality clauses – Is it time for reform?

What are confidentiality clauses?

Confidentiality clauses are primarily used in employment contracts – for example, to protect trade secrets and intellectual property and as part of settlement agreements.

There are legal limitations on confidentiality clauses, such as they cannot remove protections around making a protected disclosure (whistleblowing claims). They also cannot ordinarily prevent someone from taking a matter to an employment tribunal, although COT3 agreements and settlement agreements can waive this right. For a settlement agreement to be valid and enforceable, the employee must have received independent legal advice.

Despite the limitations, there is evidence to suggest that some employers have worded confidentiality clauses to suggest that victims of harassment cannot make any disclosures and therefore intimidate them into silence when they have faced harassment or discrimination.

The government is therefore examining:

whether there should be more limitations on confidentiality clauses;
how to ensure workers are clear about the rights they maintain when they sign a confidentiality clause; and
how to enforce any new regulations on confidentiality clauses.

What are the proposals?

The proposals include that:

no confidentiality clause can prevent a person making any disclosure to the police;
confidentiality clauses need to be worded so that they clearly set out their limitations.
for settlement agreements to be valid, the worker is to be given specific advice on the nature and limitations of any confidentiality clause and the disclosures that he or she is still able to make and
perhaps the most draconian proposal being considered, is that any confidentiality clause which is incorrectly drafted would be void in its entirety. In practice, this would mean that an employee who breaches the confidentiality provisions of a settlement agreement could not be sued.

What does this mean for you?

Whilst we are awaiting the outcome of the consultation process, employers should take this opportunity to review their current confidentiality clauses both in contracts of employment and settlement agreements.

If the proposals do come into force, it is imperative that advice is sought and confidentiality clauses are drafted carefully to ensure that they are valid.