June 13, 2013

Employment e-Brief – Gagging Clauses

There has been an increasing amount of press coverage relating to “Gagging Clauses” with the BBC announcing that the head of the NHS in England is due to be challenged over more than 50 payments made to hospital staff totalling £2m since 2008 (12 June 2013).

The way the news is reported tends to suggest that money has been paid over solely to prevent staff legitimately reporting wrongdoing. This is rarely the case. In virtually all these cases, individuals signed agreed compromise agreements under which they gave up their rights to claim in the tribunals in return for which they received agreed compensation. Such agreements routinely also include confidentiality provisions, which the press hype up as “gagging clauses”. This does not mean that in all cases there was necessarily anything salacious which the employer wanted to keep a lid on.

Whilst most people would agree that in some circumstances it is in the public interest for people to speak out about wrong doing, where does that leave employers who have entered into a settlement agreement with an ex-employee and then find the ex-employee ignores the confidentiality provisions in the settlement agreement?

In these situations, employers will often want to recover any sum paid to the ex-employee under the settlement agreement and are frustrated when they find they may not be able to do so.

If the disclosure made by the ex-employee is a “protected disclosure”, then the confidentiality clause in the settlement agreement will be unenforceable anyway.  However, if the disclosure is not a protected disclosure, the way in which a settlement agreement is drafted can make all the difference when an employer is seeking to recover damages from an ex-employee for an alleged breach of the confidentiality clause.

By allocating a specific part of the agreed compensation paid to the ex-employee as being the value placed on the confidentiality clause, the employer may find they are in a stronger position should they wish to pursue a claim for breach.

However, the sum allocated to the confidentiality clause should not be so excessive that it is seen as penalty since that may then make it unenforceable.

For more information please contact a member of the employment team.