Non-Disclosure Agreements, so last season? The use of “gagging clauses” in the post #MeToo world

Non-Disclosure Agreements (NDAs) have been in the news again following the publication on 11 June of the Women and Equalities Committee’s report. 

The report is the culmination of the parliamentary select committee’s enquiry into sexual harassment in the workplace and the spotlight shone on the use of so called “gagging clauses” in settlements involving discrimination complaints.

The luxury sector, in common with a great many sectors, both private and public, has historically made use of NDAs both to protect commercially sensitive information, for example the direction of next season’s new collection, as well as in settlement agreements reached with departing employees.  

The BBC and others led with dramatic headlines about the Government proposing to ban the use of NDAs. Whilst those headlines proved to be inaccurate – no such ban being contemplated in the report – the committee’s recommendations take a determined stand against what is described as “legally sanctioned secrecy”, including proposing that:

• new legislation be enacted to ensure NDAs cannot prevent “legitimate discussion” of allegations among employees, thereby allowing staff to gather evidence in support of harassment or discrimination claims
• NDAs be required to be written in plain English, setting out clearly the information that can and cannot be shared and with whom
• corporate governance requirements be strengthened to require employers to meet their responsibilities to protect staff from discrimination and harassment, and
• named senior managers of board or similar level be required to oversee anti-discrimination and harassment policies and procedures and the use of NDAs. 

Whether or not those recommendations are enacted in the near term, all employers, and particularly those operating in the luxury space where brand identity and image is so important, should review their procedure for handling complaints of harassment and discrimination and ensure a thorough investigation is conducted before considering any form of settlement discussion. 

Finally, where complaints do give rise to an employee’s exit, employers  should consider whether it is appropriate in the circumstances for a confidentiality provision to be included in any settlement and bear in mind (and where used, expressly reflect in the clause) their legal limitations. In this regard, note that an NDA will not preclude an employee from blowing the whistle in accordance with relevant legislation, from disclosing information where there is a genuine public interest in doing so (including to prevent the disclosure of a crime) or because the employee is required by law to do so. 

While the PR and reputational reverberations of mishandling harassment claims will be of concern to all organisations, for companies operating in the luxury space the potential damage that may be caused to the brand is even more acute. Fostering a workplace culture befitting of the brand’s values will ensure not only that it attracts and retains the best talent but also that it remains in the minds of its clients and customers for only the right reasons. 

If you require further information about anything covered in this briefing, please contact Anna Birtwistle, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, July 2019