Workplace NDAs – 5 Tips for Employers on How to Use Them Properly

The use of workplace NDAs is commonplace but can be controversial. In this article we explain what workplace NDAs are and provide 5 helpful tips that employers can use when they are considering entering into settlement discussions with employees.

What is a workplace NDA

An ‘NDA’ is an acronym for ‘Non-Disclosure Agreement’, which is a confidentiality agreement between two or more parties; the phrase ‘NDA’ is also often used interchangeably when referring to employment settlement agreements (this is a contract between an employer and an employee whereby the employee agrees to waive their right to bring claims against their employer in return for an agreed settlement package).

Tips on handling NDAs in the workplace

1. Go into the negotiations with a set budget for the settlement agreement
2. Ensure that offers are put to employees on a ‘without prejudice’ basis
3. Get a properly-drafted settlement agreement drawn up
4. Make sure that the employee gets the appropriate legal advice on their agreement
5. Make sure that the confidentiality agreement has the essential caveats contained in it

Go into the negotiations with a set budget for the settlement agreement

The employee will, undoubtedly, be seeking to obtain as much as they can in the settlement negotiations – it is important, therefore, to take good legal advice on what payments are appropriate in the circumstances and set a budget for the settlement negotiations. This will help to ensure that the negotiations are as cost-effective as possible.

What an appropriate amount will be will very much depend on what the employee’s circumstances are, why the employer is considering offering a settlement agreement, and what the employer’s resources are (among other factors). What would be appropriate to offer in a case of sexual harassment, for example, would be very different to what would be appropriate in a situation where the employer was making redundancies (and, potentially, paying enhanced redundancy pay).

Ensure that offers are put to employees on a ‘without prejudice’ basis

In a legal context “without prejudice” means, broadly, that communications between parties for the purposes of settling an existing dispute are generally not admissible in court – the aim of this is to ensure that parties discussing settlement can have ‘full and frank’ discussions without the fear that these discussions could at a later date be put in evidence.

Employers should therefore ensure that communications regarding settlement are therefore made on a without prejudice basis.

Get a properly-drafted settlement agreement drawn up

This may seem obvious, but it is always important that – once settlement agreement terms are agreed – the employer gets a well-drafted settlement agreement drafted which covers the heads of terms agreed between the parties and includes the usual protections (for example, that the employee is settling their claims, that both parties agree to keep the agreement confidential, and that neither party makes derogatory comments about the other).

A failure to ensure that a properly-drafted contract is put in place could mean that one or both parties are exposed to risks that they were not expecting or, in the worst case scenario for the employer, could leave the employee able to bring claims in the future (when, of course, the intention is normally to ensure that everything is settled when the agreement is signed).

Make sure that the employee gets the appropriate legal advice on their agreement

In order for a settlement agreement to be legally-binding an employer must ensure that an employee obtains independent legal advice on the terms and effect of their settlement agreement. Employers will therefore normally encourage an employee to obtain legal advice from an independent third-party solicitor on the terms and effect of their settlement agreement and pay a contribution towards the cost of doing so (this contribution is normally in the range of £350 plus VAT to £750 plus VAT).

Make sure that the confidentiality agreement has the essential caveats contained in it

Employers are often keen to ensure that, in return for their agreeing to pay the employee a (potentially substantial) sum of money under the settlement agreement, the employee is bound by obligations which ensure that the employee cannot make statements post-termination which may affect the reputation of the employer – this is the element of the settlement agreement which is normally referred to as the ‘NDA’ or the ‘confidentiality agreement’.

Whilst it is common for settlement agreements to include an NDA, it is critically important that the settlement agreement also contains language stating that this confidentiality obligation has important caveats (for example, that the employee can still make a ‘protected disclosure’ or that they can assist the police with a criminal investigation); it is also important that the employee receives express legal advice on the effect of the confidentiality clause and on what caveats apply.

General tips on handling a settlement agreement

If an employer wishes to settle a particular dispute then they should ensure that they take prompt and effective steps to settle the dispute at an early stage – having prompt without prejudice discussions and agreeing settlement terms without delay can help to avoid a great deal of time and stress that would otherwise be incurred (for example, dealing with a grievance process, adjudicating an appeal against dismissal, or defending an Employment Tribunal claim).

In addition to the above, it must be clearly explained to the employee that they must obtain independent legal advice on the settlement agreement and that they cannot be prohibited from disclosing particular types of information (as dealt with above). This is particularly important in light of the Government’s recent consultation on NDAs in the workplace, and its conclusion that employees should be properly advised on exceptions to confidentiality.

Having prompt discussions, getting effective documentation drawn up swiftly, and making sure the employee knows what protections that they enjoy under the settlement agreement can allow the employer to settle potential disputes and concentrate on business, rather than ‘fire-fighting’ problems.