But employers cannot use them to prevent whistleblowing
Confidentiality clauses are back in the news with The Guardian recently reporting that former BBC journalist Olenka Frenkiel refused to sign an agreement that would have stopped her speaking out about age and sex discrimination in broadcasting.
The report follows the considerable publicity surrounding the use of so-called gagging clauses in public sector organisations, especially the NHS, as well as in other employment contexts. Consider, for example, cricketer Kevin Pietersen whose central contract with England was ended on terms that included a time-limited confidentiality clause - thereby ensuring maximum publicity for his account of events leading up to his departure from the England team.
Yet despite the controversy often surrounding gagging clauses they are lawful and, in principle, enforceable.
Confidentiality
Gagging clauses are provisions inserted into settlement or compromise agreements (used to settle a dispute and avoid claims). Their purpose is to keep private the nature of the settlement, the amount of money paid to the departing employee and the factual circumstances leading up to the termination. The employee agrees, with or without a time limit, not to reveal these details to anyone other than immediate family, professional advisers and appropriate public authorities.
Enforcement
Employers can enforce gagging clauses with a claim for damages or by demanding repayment of sums paid to the employee in whole or in part under the settlement agreement. In some circumstances, an employer learning in advance of an employee’s intention to break the terms of the provision may seek a court injunction to prevent this happening.
However, while gagging clauses are for the most part enforceable as contractual terms under the Employment Rights Act 1996 (Section 43J), any clause in a settlement or compromise agreement is void if it seeks to prevent a worker from making a protected disclosure (blowing the whistle). But although such clauses cannot legally be used to prevent anyone from whistleblowing, no doubt some workers who have been offered or accepted compromise agreements containing confidentiality clauses have felt gagged. Perhaps the best way to avoid that is to ensure the confidentiality clause spells out that it does not prevent the employee from making a protected disclosure. That, however, may be precisely what the employer wants to achieve.
Out of court settlements
Gagging clauses can be especially attractive to employers who are seeking to settle claims out of court. Compromising an existing or anticipated lawsuit saves legal costs and time and avoids the stress of attending a court or tribunal hearing. For an employer, replacing the risk of having to pay a significant sum with the certainty of paying a lower one makes good commercial sense.
In addition, no tribunal or court will issue an order to prevent a successful claimant from revealing publicly and, perhaps with more damaging consequences from the employer's perspective, to former colleagues how much he or she has been awarded. To do so would undermine a cardinal feature of open justice. Neither can a successful employer who defeats a claim prevent details entering the public domain. Subject to rare and exceptional cases where a tribunal has the power to restrict publicity, confined mostly to sexual misconduct or where other sensitive personal information would be revealed, all dirty linen washed in public can be fully exposed.
The incentive to settle is, therefore, even more compelling when the employer can demand from an employee a gagging clause as part of the deal. Some employers may be prepared to pay more than the claim is worth for that benefit.
Of course, as Olenka Frenkiel has shown, no employee who alleges he or she has been dismissed or discriminated against is bound to accept a gagging clause. If they refuse to do so, the claim may be abandoned or settled without such a clause or the dispute can be be taken to a court or tribunal – and if that happens, no power exists to prevent publication of the details.
Stephen Lennard is a barrister at Hardwicke chambers specialising in employment law
For more employment law articles, visit HR-inform