Non-disclosure Agreements
HR Dept
Non-disclosure agreements (NDAs) have long been used to stop people talking about stuff. When drafted properly they are legally binding contracts.
When it comes to business, there are many reasons why you may want to keep some things to yourself. They are often perfectly reasonable, essential even, when it comes to trade secrets for instance.
However, there has been persistent accusation – and particularly since the #metoo movement – that they are too often used to cover up wrong doing, and even enable and perpetuate it.
The government has already acted
The #metoo weight behind this comes from covering up sexual harassment, of course. And this has been proven to be a very real intention of some NDAs. Any neutral would recognise the moral repugnance of such tactics, and it is also clear that when someone has “gotten away” with it once, it may be seen as a handy tool to continue their abuse of power.
Sexual harassment is not the only underlying factor where this is an issue. Settlement payments and associated NDAs (whether explicitly called that or not) can be used to mask entrenched discrimination within organisations: Paying people off for their silence when they have been illegally discriminated against.
This rightly brought such use of NDAs into the sights of the government, and they have acted. Since 20 November 2024 there is a general ban on NDAs where there have been allegations of discrimination, harassment or sexual harassment. Enter into one and it will be considered null and void. There are two exceptions if certain conditions are met, relating to WRC mediated settlements and where the employee requests the NDA.
If, as an SME you have such issues where your temptation would have been to go for an NDA, a better long-term solution would be to address your underlying problems. Whether it is policies, procedures, company culture or a combination of the three, we can help and make you a stronger company for it!
Fair use of NDAs for SMEs
SMEs, though, can be a hotbed of creativity or entrusted with sensitive personal or commercial information for the clients or customers they serve.
So whether it is the proprietary recipe behind your hit dish, an innovative engineering solution awaiting patent or sensitive mental health information about clients, there are some things you must fight to protect!
An NDA is one of the tools at your disposal to do this. It is something you should ensure is done properly though for it to be effective. This includes:
Being specific about what is covered
Outlining the precise obligations
Detailing how long the NDA will be effective and any break clauses prior to this
What happens if a party breaches the terms, the legal consequences and costs etc.
These may cover employees, suppliers and advisers. To have confidence in your NDA, always take advice first and ensure it is professionally drafted.
Beyond NDAs
Being such a buzzword, it is easy to get caught up in NDAs and forget that there are other good practices you can follow to protect commercially sensitive information.
As an employer and business owner think broadly: Good IT systems and cyber security, strong recruitment to pick trustworthy staff, a well-drafted contract of employment with a restrictive covenant, regular training that sets expectations, robust internal controls like having a need-to-know-basis mentality for anything sensitive and physical security like restricted access and appropriate CCTV.
Legitimate Purpose: NDAs should not be used to prevent employees from reporting serious wrongdoing or breaches of law, particularly to relevant authorities.
Protected Disclosures (Whistleblowing)
Protection: The Protected Disclosures Act, as amended by the 2022 Act, protects workers who report wrongdoing in the workplace. Ordinarily and unfair dismissal claim has a ceiling of two years salary as the maximum award. In a case of dismissal, if it can be attributed to reporting an issue under protected disclosure act, that ceiling jumps massively to five years salary!
Help from The HR Dept
Where NDAs and employment overlap, The HR Dept are here to help. We can advise you on what is appropriate, the bigger picture and help with drafting an effective NDA. Please get in touch and we would be delighted to help.
