Non-Disclosure Agreements: All You Need To Know
Fiona Martin, Head of Employment Law, explains what Non-Disclosure Agreements are and what you need to be aware of.
Non-Disclosure Agreements hit the headlines in the UK due to investigation findings about sexual harassment and unlawful discrimination in the workplace.
Historically, Non-Disclosure Agreements have been used to prevent staff disclosing confidential information about their jobs to new employers or to the press. The #MeToo campaign uncovered strong evidence that serial sexual harassment perpetrators had gone on to sexually harass and assault more women because their previous victims had been silenced and paid off. They are usually found in Settlement Agreements.
There is now political and regulatory concern that these Non-Disclosure Agreements are being used “to cover up unlawful and criminal behaviour”. The Law Society has produced a factsheet called ‘NDAs and Confidentiality Agreements – What You Need To Know As A Worker’ in response to these concerns.
What is a Non-Disclosure Agreement (NDA)?
A Non-Disclosure Agreement is a legal contract, where the parties agree not to disclose any confidential or sensitive information. A Non-Disclosure Agreement will define what is confidential, and they are often used to protect intellectual property and to keep trade secrets.
What is the Purpose of a Non-Disclosure Agreement?
A Non-Disclosure Agreement seeks to protect the reputation of the company as well as company secrets by restricting what workers and employees can reveal. By signing a Non-Disclosure Agreement, both parties are agreeing to keep items defined as confidential in the agreement secret. Non-Disclosure Agreements are used when employees have access to confidential and proprietary information about a business during the course of their job. They are also used when there is a dispute between the parties which is settled by the employer paying the employee compensation.
The Key Elements of a Non-Disclosure Agreement
- Identification of the Parties
- This is usually a straightforward description of the people or organisations the agreement covers
- Definition of what is deemed to be confidential
- This defines what confidential information means. It is important that the nature of the confidential information is clearly defined: for example, customer lists and pricing, and it is outside the public domain. If settling a dispute, then it needs to be clear whether this covers the circumstances of the employee leaving their employment or just the fact that a Settlement Agreement has been offered and the terms within it.
- The scope of the confidentiality obligation by the receiving party
- This is frequently a two-part obligation on the receiver of the information – both to keep the information confidential, and not to use the information themselves.
- The exclusions from confidential treatment
- Non-Disclosure Agreements frequently set out exclusions to the confidentiality clause. This usually covers information that is already known to the recipient (or is already publicly known), or information that has been independently disclosed to the recipient by another party who is not bound by the Non-Disclosure Agreement. In addition, it should set out who the employee can talk to, such as family members and medical professionals.
Common Examples of Non-Disclosure Agreement Use
Settlement Agreements always include Non-Disclosure Agreements which usually include the employee not being able to tell anyone about the circumstances of their leaving their employment, the fact that they have accepted a Settlement Agreement or the terms, particularly the amount of compensation offered.
Although having a Non-Disclosure Agreement in place is essential to protect trade secrets and business contacts, there are concerns that Non-Disclosure Agreements have been used to protect perpetrators of sexual harassment and assault by buying the victims’ silence, or to silence whistleblowers. Strictly speaking, a Non-Disclosure Agreement cannot be used to prevent the victim reporting a crime to the police or to a regulator, but they often have the effect of intimidating employees into silence.
What is Deemed Confidential in a Non-Disclosure Agreement?
Anything already in the public domain cannot be deemed to be confidential and it is important that what the employer wants to protect is clearly defined. They should not be used to prevent people going to the police or a regulator about sexual misconduct in the workplace.
Are Non-Disclosure Agreements Enforceable?
Any confidentiality clause which tries to stop an individual talking to the police or a regulator will not be legally binding.
Confidentiality agreements may also not be legally binding if the employee has not been given a reasonable amount of time to think about whether they should sign the confidentiality clause or not, or they have been put under undue pressure.
If they have not been able to obtain independent legal advice, then this may also mean that the clause is not legally binding. Settlement Agreements usually provide for a financial contribution from the employer for legal advice. However, COT3 Agreements offered through ACAS, rarely provide any funding. If an employer wants to ensure that they can enforce the Non-Disclosure Agreement they should offer the same financial contribution as offered with a Settlement Agreement of between £350 – £500 plus vat.
Clauses should be drafted as narrowly as possible as there are concerns about Non-Disclosure Agreements that include future unknown claims.
Expert Advice on Non-Disclosure Agreements
It is important for both employers and employees to seek independent legal advice when offering or accepting a Settlement Agreement or COT3 Agreement. Many of these agreements have conditions which mean that if confidentiality is broken, the money that is being offered can either not be paid or clawed back. Employers also need to know that these clauses are definitely enforceable.