Gagging clauses – 2019 developments

High profile cases in 2018 saw some of the world’s foremost figures on both sides of the Atlantic being acutely criticised for allegedly using non disclosure agreements (NDAs) to cover up misdemeanours – affairs, harassment, sex offences etc. As a result in 2019 the government will undertake a review of the use of NDAs, but could that review restrict the legitimate use of these agreements and what indeed is a legitimate use?

High profile cases in 2018 saw some of the world’s foremost figures on both sides of the Atlantic being acutely criticised for allegedly using non disclosure agreements (NDAs) to cover up misdemeanours – affairs, harassment, sex offences etc.  As a result in 2019 the government will undertake a review of the use of NDAs, but could that review restrict the legitimate use of these agreements and what indeed is a legitimate use?

It’s a difficult topic to rationalise as in principle a mutually agreed confidentiality agreement between 2 parties, one of whom offers money in exchange for the other’s silence, is a perfectly valid thing. If the person being asked for silence doesn’t want the money they don’t have to take it, but if they do, should they not be bound by an agreement they voluntarily entered into? On the other hand should very rich people be effectively allowed to have no normal social barriers on their behaviour simply because they know they can buy their way out of trouble, and would it not be the case that removing the ability to enter into a legally binding agreement in these cases might actually have an overall positive impact on their behaviour and role in society?

The social responsibility questions aside it is important that any review does not result in the use of agreements by employers to protect at the very least their intellectual property and confidential information – the legitimate use of an NDA.

myHRdept regularly deploy voluntary and statutory settlement agreements to bring to an end the employment of an employee, and these agreements will always contain non derogate and confidentiality clauses to ensure that ex employees do not deliberately harm the reputation of the employer, or use the employer’s confidential information or intellectual property for the benefit of themselves or a competitor. It is for this purpose that these agreements were originally designed, and in the case of settlement agreements they are specifically provided for in law. The legal position aside these are enormously useful agreements that can expediently conclude employment in a way that is mutually acceptable to both employer and employee.

We will await the 2019 review to see what the impact will be on these useful tools.

What is a voluntary settlement agreement?

A voluntary settlement agreement is a watered down version of a legally binding Settlement Agreement (SA.) Unlike the SA the voluntary version is binding in honour only, and while a court may consider it, it cannot be relied upon in itself to absolutely prevent the employee in engaging in the things the employer wishes them not to. It is though an effective tool in the majority of cases where an employer wishes to bring an employee’s employment to an end without having to engage in lengthy processes, and most employees stick to the agreed terms.

What is a Settlement Agreement?

This is a legally binding version of the voluntary settlement agreement and like the voluntary version will usually contain some behaviour limiting clauses e.g. a promise not to be derogatory about the employer or any of its employees; not to use confidential information or intellectual property etc. Whilst legally binding the Settlement Agreement generally takes longer to achieve and the employee must be separately legally advised, usually at the expense of the employer. Legal advisors may encourage employees to negotiate on sums offered and so ultimately this is often a more expensive route to achieving the same end point (albeit legally enforced) as the voluntary agreement. In the case of litigious employees it might prove necessary to use the fully binding version.

How is it possible for an employer to terminate employment without following a process?

By achieving an agreement with the employee. Normally this requires at least the start of a process first e.g. putting an employee at risk of redundancy, or at risk of formal performance management procedures.  The process started cannot be a sham however, and the option for the employee to leave must always be non pressured and entirely voluntary. Great caution is required on positioning these proposals and clients normally ask myHRdept consultants to handle these conversations on their behalf.

If you’re thinking of outsourcing your HR or employment law needs, why not contact myHRdept? Call us on 01628 820515 to discuss your requirements or contact us and we’ll call you back.

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