Does a Settlement Agreement protect an employer forever?
Many people will have signed a Settlement Agreement with their former employer which contained a non-disclosure agreement (NDA) or ‘gagging clause’ to protect customer information, intellectual property or trade secrets. However, evidence is emerging that they are also being used to silence former employees to cover discriminatory and unlawful behaviour – particularly workplace sexual harassment or bullying.
Although, under the Public Interest Disclosure Act 1998 and Sections 43A to 43L and 103A of the Employment Rights Act 1996 certain disclosures qualify for protection and there is a requirement to include wording for employees that does not deter them from ‘whistleblowing’, that is, reporting malpractices by their employers. Section 43J(1) of the Employment Rights Act renders contractual terms void insofar as they purport to preclude the making of a protected disclosure.
When a Settlement Agreement becomes unenforceable
However, many employees do not realise that the agreement is unenforceable by the employer if it relates to workplace sexual harassment which would constitute a criminal offence and may be reluctant to report such an offence for fear of then having to repay the termination payment.
Information relating to a criminal offence is one of the categories that allows an employee to disclose certain information and any agreement that prevents this right is likely to be held invalid.
The government is currently reviewing the law to ban the use of non-disclosure agreements or confidentiality clauses that are designed to prevent employees from reporting potentially unlawful behaviour to the police.
NDAs in the news
The move follows recent press revelations that Philip Green, the retail tycoon, used NDAs in settlement agreements to silence and pay off several members of staff who accused him of sexual harassment and racism.
Although the law has long recognised that certain information cannot be confidential and subsequent case law has developed this concept to acknowledge that there are circumstances in which public policy (or interest) will override the express – or implied – duty of confidentiality owed by an employee to an employer, it is proposed to extend the current protection to non-disclosure agreements in settlement agreements so that sexual harassment, intimidation, sexual discrimination or bullying claims which may not necessarily be illegal can be reported and the employer will no longer be able to hide behind the terms of the settlement agreement where it is not in the public interest.