Confidentiality Clauses – Help Or Hindrance?
As solicitors, we use the phrase ‘in confidence’ a lot. Which is true – when you speak to us as a client, what you say is held in confidence, which means we won’t tell anyone about it. The same logic applies to confidentiality clauses in contracts, which are designed to stop both parties talking about certain things, especially around certain people. But recently there has been some concern around confidentiality clauses, and whether they are being used to help all parties involved, or simply to abuse them.
What are Confidentiality Clauses?
A confidentiality clause (also known as a non-disclosure agreement or NDA) are contracts put into place between businesses and individuals to stop parties disclosing information. They are most commonly found in employment contracts, designed to stop employees of a business taking their secrets and data to competitors. Overall, they serve a useful and legitimate purpose when used properly, and are a good way for businesses to protect themselves against data leaks or competitor espionage.
The Misuse of Confidentiality Clauses
So if they work, what’s the problem? Well, a number of cases have been raised around the misuse of confidentiality clauses. So many cases in fact, that the government has published a consultation on the subject, to try and find out what they could do to prevent them being abused. There are a number of concerns around the use of these clauses, but the main issue seems to be that employers have been using confidentiality clauses to prevent victims of workplace harassment, discrimination or sexual assault from speaking out.
So What Will Change?
Under the governments new proposal, the use of confidentiality clauses (both within employment contracts and externally as part of a settlement agreement) would be more strictly regulated. However, the government does recognise that confidentiality clauses can benefit both the employee and the employer, so they are not proposing a complete ban on them. Instead, they want to make sure that they are used correctly, and not as a form of ‘gag order’ for employees, particularly when being used in settlement agreements dealing with discrimination and harassment.
Specifically, measures would be taken to:
- Prohibit the use of any clause preventing disclosures to the police or others.
- Require all confidentiality clauses in settlement agreements and written statements of employment particulars to highlight clearly what disclosure the clause does not prohibit.
- Automatically make any confidentiality clause void if it does not meet the new requirements.
For employers, this means you need to review your contracts and agreements and make sure your confidentiality clauses are updated, if you have them.
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