Striking a new balance in confidentiality clauses

Jog Hundle | jog.hundle@mills-reeve.com

Employers are advised to adopt a balanced approach to confidentiality clauses so that they are not unnecessarily restrictive, are understood by both parties and are genuinely in the public interest.

The routine inclusion of confidentiality clauses in settlement agreements and their scope has come into sharper focus prompted in part by the Weinstein scandal, but also as a result of those cases where confusion and uncertainty is created for those who sign such agreements and then feel constrained to speak up. 

A high-profile example was recently before the Parliamentary Equalities Committee, and concerned Weinstein’s former assistant, Zelda Perkins.  Ms Perkins had raised sexual harassment complaints and entered into a settlement agreement with one of Weinstein’s companies, Miramax, back in 1999.  The agreement not only required her to keep the agreement and her allegations confidential but required her to contact Miramax’s lawyer before making any criminal disclosures and to limit the scope of any such disclosures.  She was not even allowed to keep a copy of the agreement!

More recently Parliament itself came under scrutiny in relation to allegations of sexual harassment and bullying in the House of Commons, leading to the appointment of Dame Laura Cox to conduct an independent enquiry.  Her report, published on 15 October, makes uncomfortable reading for its senior leadership and reactions to it illustrate just how damaging it can be for employers if they fail to tackle the such allegations adequately.

The Solicitors Regulation Authority has made its position clear in a warning notice issued to solicitors on 12 March 2018 by stating that confidentiality agreements must not prevent anyone from notifying regulators or law enforcement agencies of conduct which might otherwise by reportable.  The SRA also warns that confidentiality agreements should not be used “as a means of improperly threating litigation or other adverse consequences, or otherwise exerting inappropriate influence over people not to make disclosures which are protected by statute, or reportable to regulators or law enforcement agencies.” 

NHS framework

The Mid Staffordshire Inquiry made it clear that:

 “Any clause restricting an individual’s liberty to make a disclosure or impose a duty of confidentiality should be limited to the minimum necessary to protect public interest and not the reputation of any organisation or individual.”

NHS Employer’s guidance (December 2013) also provides:

“In all cases where outlining a confidentiality and/or clause against non-derogatory comments within a settlement agreement, it is essential that you make it explicitly clear to the employee within the written agreement, that this does not prevent them from raising legitimate concerns about a patient safety, or other issue, in the public interest under the terms of Public Interest Disclosure Act.”   

 

Why use confidentiality clauses?

Confidentiality clauses play an important role in protecting the confidential information and commercial interests of an employer and can benefit both parties.    

They are also used in many instances to keep the circumstances surrounding the termination of employment and the existence of the agreement confidential.  For many employers the inclusion of such confidentiality provisions is a key component of the settlement and indeed employees may also want to secure confidentiality for themselves. Consideration however needs to be given to whether such confidentiality clauses are appropriate in all cases and whether the qualifications to this obligation need to be spelled out more clearly. 

Restrictions on confidentiality clauses

Certainly, those signing agreements must not be prevented from raising patient safety concerns, protected disclosures under the Public Interest Disclosure Act 1998, matters which may give rise to criminal proceedings or require a report to be made to the regulatory authorities.  Neither must they be given the impression that reporting or making a protected disclosure is prohibited.  Inappropriate or disproportionate threats, including a threat of defamation proceedings, where such a claim is known to be unsustainable, must not be used. 

Employers will also need to ensure that the confidentiality clauses do not include clauses known to be unenforceable, for example a restriction on working again in the NHS.

It may therefore be appropriate to state what disclosures are not prohibited by the confidentiality agreement.  In some cases it may be necessary to spell out exactly what disclosures are protected by the Public Interest Disclosure Act, or to refer the employee to authoritative guidance (for example your organisation’s own whistleblowing policy, or the model policy produced by NHS Improvement).

Where there has been a serious breach of these requirements, it is likely that regulatory investigations will follow.         

What is the future for confidentiality clauses?

There is a strong case that a balanced approach to confidentiality clauses is adopted so as to include:

  • The carve-out wording set out in the NHS Employer’s guidance of December 2013, which preserves the ability to raise “…. legitimate concerns about a patient safety, or other issue, in the public interest under the terms of Public Interest Disclosure Act”;

  • A clear explanation of what falls within whistleblowing, or reference to appropriate guidance;

  • The ability to make any voluntary disclosures to the police and regulators; and

  • Any disclosure to legal or medical advisers.