Law Society restrictions on Non-disclosure Agreements and Confidentiality Clauses

The Law Society has published guidance on the drafting of confidentiality clauses within settlement agreements and/or COT3 agreements. Although this is aimed at solicitors, this has implications for all employers and employees in what they can legitimately include in settlement agreements.

Background

The practice note was published following recommendations from the Women and Equalities Committee calling for tightened controls on the use of Non-disclosure Agreements (NDAs) after recognising that employers had unethically included such provisions to silence employees who had been subjected to sexual harassment.

The Guidance

The practice note draws a distinction between using confidentiality clauses for a legitimate purpose upon the termination of employment (i.e. to protect the employer’s legitimate business interests), and seeking to prevent the disclosure of illegal activity (i.e. clauses which purport to prevent the making of protected disclosures, more commonly referred to as whistleblowing).

The guidance goes on to state that clauses which include, in clear simply English, exceptions or restrictions on the broad duty of confidentiality are permissible. For example, for the purpose of making a protected disclosure, to seek tax, medical or other professional advice or for the purpose of reporting misconduct to an appropriate regulator.

For an agreement to work, the guidance emphasises the importance of ensuring that it can be understood by all of the parties.  It is also good practice to give anyone signing an NDA sufficient time to consider the implications and seek independent legal advice.

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