Reforming NDAs – why it won’t solve the real problem

The first thing to be clear about is that almost any settlement of a potential Employment Tribunal claim will include a confidentiality clause. This may be called a non-disclosure agreement or an NDA. If you are a journalist. the term you probably want to use is ‘gagging clause’.

If the parties are going to settle a case then they both need to be confident that the matter has indeed been settled and will not be resurrected in some other form. Where the case involves allegations of improper conduct then in most cases a party will only settle the case on the basis that those allegations – which may well be strenuously denied – will not be repeated.

Banning non-disclosure agreements is simply not an option in a system that encourages parties to settle employment disputes before they are heard by the Employment Tribunal. It is not going to happen.

So why have MPs on the Women and Equalities Committee called for NDA’s to be banned as reported by the BBC here?

Well they haven’t. The Committee’s report does not actually call for a ban. Instead it makes a wide ranging series of recommendations about how complaints of sexual harassment should be dealt with. Central to the report is a concern that there is an imbalance of power between an individual employee making a complaint and a large employer with the resources to fight that complaint aggressively, threatening the employee with costs if he or she (usually she in this context) refuses to settle the case on the terms being offered.

None of the committee’s recommendations involve NDAs being banned. Instead the Committee says that their scope should be more clearly defined and that employees should be entitled to proper advice – funded by the employer – as to what they can and cannot disclose under the agreement.  There should also be clampdown on employers and lawyers who use unenforceable confidentiality clauses to intimidate employees into silence.

Most of these recommendations seem sensible enough to me. In fact is difficult to see anyone having a real objection to them. As far as I am concerned they can join the list of employment law reforms to be made as soon as we have a Government able to concentrate on something other than Brexit or who the next Prime Minister should be.

Other recommendations are more difficult. To my mind the most radical is this one:

14.We call again on the Government to urgently improve the remedies that can be awarded by employment tribunals as well as the costs regime to reduce disincentives to taking a case forward. Tribunals should be able to award punitive damages and there should be a presumption that tribunals will normally require employers to pay employees’ costs if the employer loses a discrimination case in which sexual harassment has been alleged. The bands in the Vento guidelines should be increased significantly to take into account the non-financial impact of discrimination. These changes should be made within the next two years. (Paragraph 67)

This would be a real game-changer. It gets to the heart of the imbalance between employee and employer in the Tribunal system. The uncomfortable fact is that bringing a Tribunal claim for harassment is so gruelling an experience that it’s a border-line irrational thing to do. The prospect of recovering legal costs and winning punitive damages if successful might well encourage some to proceed with a claim rather than settle for a modest pay-off with an NDA.

But there is little to no prospect of this proposal being picked up by Government. It isn’t realistic to expect the costs regime for sexual harassment cases to be different from that in other cases and if you make it normal for an employer to have to pay the successful employee’s costs, then the pressure would be overwhelming to make employees pay the employers’ costs if their claim fails. Making costs ‘follow the event’  –  so that the loser pays the winner’s costs – would transform the system, but it is not clear that this would be to the benefit of claimants.

Perhaps the real problem lies not in the individual features of the Tribunal system, but in the nature of the system itself.  If you believe that you have been discriminated against in the UK then enforcing your legal rights is down to you. You can hire lawyers to help you or you may be a member of a trade union that will back your claim, but you basically have to fight your own case.

The process is, by its nature, adversarial. There is little to encourage an employer to be introspective and consider where it might have gone wrong. Once it is being sued for discrimination it is likely to want to defend itself. That can mean defending those accused of harassment and attacking the honesty and motives of the claimant. Taking a case to a Tribunal can be horrible and I would never criticise someone for agreeing to accept a settlement – and the NDA that goes with it – rather than taking the case all the way.

We should also remember that being wrongly accused of discrimination is also horrible and it would be naïve to assume that it never happens. Many of the employers who reach settlements would argue that the confidentiality clause merely protects their managers from being subjected to further false allegations. Settling a case – even for a considerable sum – is not always a sign of guilt.

It is just possible that this adversarial process is not the best way to eliminate discrimination and harassment in the workplace.

An alternative approach might be to have a body that can carry out its own investigations into allegations of harassment and require employers to cooperate in eliminating unlawful behaviour. The Equality and Human Rights Commission could in theory fulfil that role, but it is currently set up and resourced more as a pressure group. The enforcement action it does take is limited to high profile investigations or intervening in landmark cases – it does not investigate individual allegations of discrimination against employers who are not in the public eye.

If the Government was really committed to eliminating harassment and discrimination it would be looking at revamping the Equality Commission to give it real enforcement powers that it could actually use. But this means spending money on a Quango and I don’t see any of the current candidates for Prime Minister being likely to commit to that. Instead we will see some tweaks to the law on NDA’s to provide better information and some safeguards against abuse. Politicians will then be able to claim that they have done something about the problem. But as long as the whole burden of fighting discrimination is placed on the victims, then well-resourced employers will still be able to buy their way out of trouble.


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About Darren Newman

Employment law consultant, trainer, writer and anorak
This entry was posted in Employment Tribunals, settlement agreements, Uncategorized and tagged , , , . Bookmark the permalink.

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