Government must substantially increase compensation to deter employers from covering up discrimination

The House of Commons’ Women and Equalities Committee has today published its report into the use of non-disclosure agreements in some discrimination cases - specifically, sexual harassment and pregnancy and maternity discrimination.

The Committee, which is appointed by the House of Commons to examine the expenditure, administration and policy of the Government Equalities Office, launched its inquiry last year.

The group of MPs are concerned about the routine inclusion of non disclosure clauses in settlement agreements which prevents victims of sexual harassment from speaking out about their experiences - usually in exchange for receiving compensation. It says these agreements provide an easy escape route for employers who don't want to investigate or deal with underlying cultural problems in their organisations and reflect the power imbalance between the parties.

It makes a number of important recommendations which, if implemented, should lead to change.

Increase compensation

Successful employees should receive significantly higher awards - including those designed to compensate them for their injury to feelings (known as 'Vento' awards) which currently range from £900 to £44,000 for the most serious cases. Compensation should 'punish' the employer rather than simply compensate the victim for their losses.

'One way' cost shifting

There should be a presumption that, if the employee succeeds with their claim, the tribunal will order their employer to meet their legal costs. 

Employers will not be able to recover their costs if the employee loses - unless the existing exceptions apply, such as the employee has behaved unreasonably. But, refusing to sign a NDA should never, in itself, amount to 'unreasonable behaviour'.

Employers should pay for employees to receive advice about settlement agreements

Employers should be compelled to pay the employee's costs of obtaining legal advice about the reasonableness and enforceability of the settlement terms on offer, and this should be payable, even if the employee decides not to sign it. Plus, employers should pick up the additional costs involved if the employee wants to renegotiate the terms.

Increase the time limit for bringing claims to six months

Individuals wishing to bring sexual harassment or pregnancy and maternity discrimination claims should have more time to do so. This mirrors previous recommendations made by the Women and Equalities Committee.

Standardise non disclosure terms

Non disclosure clauses should be clear and specific about what information the employee can share and with whom and explain, in plain English, the effect and limitations of these clauses.

The parties should also agree what the employee can say about the reasons they left their previous employment or are looking for a new job, for example in job interviews or to respond to queries by their colleagues or family and friends. 

It also asks the government to prepare standard clauses which set out the amount of damages an employer can recover if the employee fails to comply with the confidentiality terms. Non standard clauses should be unenforceable unless there is a clear need to include them which needs to be explained to the employee.

Strengthen corporate governance

All public and private organisations should nominate senior named senior managers (not HR) at board level or similar to oversee anti-discrimination and harassment policies and procedures and the use of NDAs in discrimination and harassment cases.

Our view

Employment partner, Melanie Stancliffe comments:

"It remains to be seen if the government will implement any of these recommendations - not least because it is mired in discussions about who should be the next Prime Minister and how to resolve Brexit.

The proposal to increase damages and award costs to successful claimants will be a game changer and could lead to permanent change.

Annual statistics for 2017/18 indicate that the average award for sex discrimination was just over £13,000. Complex sex discrimination claims can be extremely expensive to fight and many employees don’t have the resources to pursue them. If awards were increased and costs awarded, more solicitors may offer the sorts of ‘no win no fee’ arrangements common in personal injury claims. This is likely to encourage more victims to bring claims.

The other interesting suggestion is that employers should pay more to ensure that employees receive full legal advice before they enter into settlement agreements.

Settlement agreements are already subject to strict rules and have to be counter signed by a solicitor, or someone else who is authorised to advise on them. The committee suggests that these rules are not robust enough and that employees don’t receive adequate advice about whether the terms on offer are reasonable.

That’s not my experience. Most lawyers will advise their clients about what they could expect to receive if their claim went to tribunal and ultimately, deciding whether or not to accept the offer is one the client has to make – not their lawyer.

Most employers will also make a contribution towards the employee’s legal costs of taking advice. These are rarely sufficient to cover the costs and it’s interesting that the committee suggests costs should reflect the actual cost of providing advice and should be made even if the employee then decides not to sign the agreement. Many employers will be very uncomfortable with that suggestion and amazed that they might be asked to pay their employees legal costs of negotiating a higher settlement."