NDAs: restrictions on the ability to ‘gag’ individuals
Businesses should note that from 1 October, new laws on non-disclosure agreements (NDAs) came into effect. Commercial success depends on confidentiality, but requiring confidentiality has its place.
An NDA (or ‘gagging order’) may be a single, standalone contract or be one part of a wider contract, such as an employment contract or severance agreement that includes confidentiality clauses. An NDA requires one party to keep information confidential in exchange for payment (or other valuable consideration) by the other party.
However, NDAs have frequently been publicised in recent years more for their notoriety (particularly in the US) in silencing whistleblowers or victims of crime than for fair business use. The terms have often been weighted heavily against the individual.
Section 17 Victims and Prisoners Act 2024 is now in force and makes void any NDA or similar provision that prevents someone from disclosing information by a victim of crime. The Ministry of Justice has also issued new guidance alongside the new legislation for businesses in England and Wales who use NDAs. The guidance for businesses can be found here
Headline points
The key points businesses need to note are:
· The guidance applies to NDAs used in all areas: business, arts, charity, education, healthcare and technology
· It applies to all relationships and circumstances where NDAs are used (not just employers-employees relationships)
· The statutory protection for victims of crime, that NDAs cannot prevent them reporting the crime to the police, are extended to bring further ‘permitted’ disclosures within scope
· Permitted disclosures include to victim support services and health professionals; to solicitors for the purposes of legal advice about the relevant conduct; to regulators; and disclosures to close family for the purposes of support
The new rules are not retrospective. Businesses and individuals who entered into a NDA before 1 October will not be within scope of the new rules and may be enforceable.
Further tightening of NDAs
The Employment Rights Bill is expected to bring in further restrictions on NDAs. It is proposed to prevent employers from silencing those who raise concerns relation to ‘relevant’ harassment and or discrimination (or about the employer’s response to a complaint).
Certain ‘excepted’ agreements will be outside of its scope. The bill in currently in its final stages.
What should we do?
While NDAs have their place, businesses would be wise to use them only when genuinely necessary and reasonable to protect their business interests. They should not be used to take an unfair advantage of an individual who has been the victim of crime (or who reasonably believes they were a victim) or has, for example, complained of harassment or discrimination.
The new legislation will provide much-needed protection to individuals and prevent organisations from using them unreasonably attempting to gag workers.
Businesses should take steps to understand the new and upcoming restrictions on NDAs and the potential implications for your organisation. Feed this into your internal policies and procedures, and ongoing staff training. Finally, keep an eye on updated guidance as the list of those who may make permitted disclosures could be widened.
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