In recent years, considerable political discourse has surrounding the use of confidentiality clauses, sometimes disparagingly referred to as “gagging clauses,” within settlement agreements. While politicians frequently promise reform in this area, robust legal protections already exist to prevent the misuse of confidentiality clauses. This article examines the current legal framework and explains why many proposed reforms would be mostly redundant.
Confidentiality Clauses
The Role Of Confidentiality Clauses
When drafted correctly, confidentiality clauses contained in settlement agreements are designed to be mutually beneficial for both employer and employee in terms of protecting their legitimate interests. For instance, they:-
- Protect sensitive business information
- Maintain workplace stability
- Safeguard both employer and employee reputations
- Provide clarity on post-employment obligations
- Create certainty for all parties involved
Protected Disclosures
Any confidentiality clauses, however, that attempt to “gag” an employee from speaking out in the public interest, such as in relation to discrimination and harassment in the workplace, would be void and unenforceable. This is because such a disclosure would amount to a protected disclosure (i.e. whistleblowing) under the Public Interest Disclosure Act (PIDA) 1998 (as amended by the Enterprise and Regulatory Reform Act 2013). Hence, the right to make protected disclosures overrides confidentiality clauses contained in any settlement agreement that attempts to constrain/restrict that right, thereby rendering that part of the confidentiality clauses void and unenforceable.
No Derogatory Remarks Clauses
Moreover, most settlement agreements contain reciprocal ‘no derogatory remarks’ clauses, under which both parties agree not to make derogatory comments about the other. The right to make a protected disclosure overrides any ‘no derogatory remarks‘ clause that attempts, via such a clause, to constrain/restrict that right, thereby rendering it void and unenforceable.
Duplication
Nevertheless, these facts have not stopped politicians from promising so-called “reforms” regarding so-called “gagging clauses.” For example, last April, the previous government, shortly before its electoral defeat, announced that a new law would be introduced to prevent confidentiality clauses within settlement agreements from being used to prevent people from reporting a crime. On account of its electoral defeat shortly afterwards, these proposals went nowhere.
Had this new law been implemented, it would simply have duplicated existing laws, given that, as stated, confidentiality clauses cannot be used to prevent the reporting of a crime (i.e. because they cannot override the right to make a protected disclosure, with any attempt rendered void and unenforceable).
Future Legislative Developments
Whilst future legislation might help clarify the boundaries of confidentiality clauses, it’s unlikely to alter the existing legal framework fundamentally. Any new laws, therefore, would likely focus upon:
- Providing more explicit guidance on acceptable clause content: Future legislation could establish more detailed guidelines on what constitutes acceptable content within confidentiality clauses. This could include specific examples of permissible and prohibited terms, standardized language requirements, and more precise definitions of what constitutes legitimate business interests versus potential misuse.
- Making existing protections more explicit: This could involve more precise language about what employees can and cannot discuss post-employment.
- Enhancing awareness of employee rights: Additional requirements for employers to provide detailed information about employee rights during settlement negotiations, including explaining the scope and limitations of confidentiality clauses.
- Streamlining enforcement mechanisms: Future reforms could establish more efficient mechanisms for challenging potentially unfair confidentiality clauses, including simplified reporting procedures and clearer penalties for employers who attempt to impose overly restrictive terms in settlement agreements.
Balancing Protection and Transparency
Whilst political rhetoric often suggests a need for dramatic reform, the existing legal framework already provides robust protections against the misuse of confidentiality clauses. Future legislative changes might seek to provide additional clarity and streamline enforcement mechanisms, but the fundamental principle remains: confidentiality clauses cannot legally prevent individuals from speaking out in the public interest about wrongdoing or making protected disclosures.
The path forward lies not in dismantling the current system but in enhancing transparency around its application and ensuring that all parties understand their rights and responsibilities under existing law. This approach will better serve both employers and employees while maintaining the delicate balance between confidentiality and accountability essential in modern workplace relations.
