A clampdown on non-disclosure agreements (NDAs), included in the Employment Rights Bill (ERB), may protect victims, but it risks turning quick resolutions into protracted disputes, warns Alex Elliott, employment associate at Birketts law firm.
The ERB is expected to receive Royal Assent this autumn. In a significant recent amendment, a new clause has been added which aims to limit the use of NDAs by employers.
NDAs are routinely included in employment contracts which, together with the implied duty of confidentiality, protect employers against the unauthorised use or disclosure of their confidential information both during and after the employment relationship ends.
Employment dispute
They are also frequently included in settlement agreements reached either on termination of employment or in resolution of an employment dispute. These will often contain restrictions against each party disclosing details of the underlying dispute or making damaging public comments about the other (for example, on social media).
The latter restrictions have come under increasing criticism from politicians, in the media and from campaign groups. Concerns centre on the potential of such agreements to prohibit people from making disclosures about discrimination and harassment, particularly sexual harassment, at work.
There are already restrictions on their use in an employment context. For example, agreements that seek to prevent whistleblowing disclosures, which could include revelations about discrimination or harassment in certain circumstances, are void.
As of 1 October 2025, NDAs are also void where they prevent a victim of crime from making certain ‘permitted disclosures’. This includes disclosures to law enforcement agencies. Solicitors are further expected to comply with regulatory guidance regarding the inappropriate or improper use of these agreements.
Therefore, NDAs in settlement agreements will often expressly permit disclosures to, for example, immediate family members, legal, medical and tax advisers, regulators, law enforcement agencies and tax authorities.
Broad application
The ERB will insert a new section (202A) into the Employment Rights Act 1996. Essentially, any term in an agreement between an employer and a worker will be void if it tries to prevent the worker from making an allegation or disclosure related to ‘relevant harassment or discrimination’ (as defined in the Equality Act 2010).
Such allegations or disclosures may either relate to the relevant discrimination or harassment, or to the employer’s response. It will therefore have a very broad application in practice.
The government will have the power to introduce regulations which allow for an “excepted agreement” to permit the use of NDAs in certain circumstances. While we do not yet know what will fall under this definition, an “excepted agreement” will likely need to meet certain requirements, such as the worker requesting the NDA, the worker taking independent legal advice, and/or the NDA being time-limited or subject to an opt-out. This will be subject to further consultation.
Imbalance of power
There are genuine concerns about the imbalance of power between employers and employees, and the potential for NDAs to be used to cover up discrimination and harassment. However, in practice, these agreements are often willingly signed to the benefit of all parties.
For employers, they allow for a dispute to be settled commercially, in a way which protects the business and avoids the expense and disruption of litigation. Employers will frequently choose to settle disputes at an early stage, even where they believe the complaint lacks merit.
For employees, including genuine victims of discrimination or harassment, the possibility of an early settlement provides an opportunity to negotiate a compensation package without either the stress of protracted litigation or the cost of legal representation. NDAs can be a key negotiation tool and, in cases of alleged misconduct or poor performance, a mutual agreement will prevent the employer from disclosing its allegations concerning the employee.
These changes will be of great importance to HR professionals. Based on the current drafting, which is subject to further regulations, there is a risk that settlement agreements will become a less viable means of resolving discrimination or harassment complaints.
Unpalatable settlements
In particular, settlement may no longer be palatable to employers if they cannot be confident that it would avoid any reputational damage. Without the incentive of an NDA, we may see more parties becoming locked into contentious and lengthy litigation in circumstances where an early settlement could have been reached.
Similarly, where allegations of discrimination or harassment are raised during exit negotiations, with senior employees for example, it may become appropriate for the employer to postpone discussions. In such cases, negotiations would pause while an investigation is conducted. Alternatively, an employer may withdraw from the negotiation altogether and proceed with the formal redundancy, disciplinary or performance management process instead.
HR professionals should be prepared for increased reliance on formal procedures, in addition to a greater need to conduct thorough and robust investigations into allegations of discrimination or harassment, even where such allegations are believed to be unmeritorious.
Prepare for the changes
The government has not yet confirmed when the provisions relating to NDAs will come into effect.
Once the bill is passed and the government introduces regulations setting out the details of the new restrictions, HR managers will need to review any template employment contracts and settlement agreements to ensure they are compliant with the new rules. This may include, for example, expressly carving out disclosures relating to discrimination or harassment.
Given that settlement agreements are likely to become less attractive to employers, HR departments will need to take a leading role both in preventing and handling complaints of discrimination and harassment, and in minimising the risk of successful claims.
Unintended harassment
Policies and procedures should be updated, and robust training should be provided to ensure all staff are mindful of their conduct and to prevent unintended harassment. This should form part of employers’ wider preparations for the ERB, which will tighten current rules on the duty for employers to take reasonable steps to prevent sexual harassment and also introduce a duty on employers to take all reasonable steps to prevent the harassment of staff by third parties.
