A recent newspaper article from the Exmouth Journal revealed that Devon County Council paid out £1,965,370 in relation to 145 settlement agreements that it entered into with former employees between 2013 – 2017.
Devon County Council: Large Payouts On 145 Settlement Agreements
In its article about the 145 settlement agreements, the Exmouth Journal stated: “A Freedom of Information Request submitted by the Exmouth Journal has revealed between 2013 and 2017 the council (DCC) spent £1,965,370 on 145 separate settlement agreements, often referred to as gagging orders.” However, whilst serious questions have to be asked of Devon County Council about how it came to enter into 145 settlement agreements in just 4 years, and the size of the pay outs, settlement agreements are not “often referred to as gagging orders” (or “gagging clauses“) and can in no way be viewed as “gagging clauses,” except in the most narrow and limited sense that it may prevent the employee from the discussing the terms of their departure. To call them “gagging clauses” in any wider sense than that is to fundamentally misunderstand the role played by confidentiality clauses in settlement agreements, and what is and is not enforceable in them.
Confidentiality Clauses in Settlement Agreements
Drafted correctly, the confidentiality clauses contained in settlement agreements are designed to be mutually beneficial for both employer and employee in terms of protecting both of their legitimate interests.
The main confidentiality clauses that are usually included in a settlement agreement are the following:-
- A clause which prohibits the disclosure of both the existence of the settlement agreement, and its terms and conditions
- A clause which prohibits the disclosure of trade secrets, business sensitive information, and client/customer data.
- A clause under which the employee undertakes not to make any derogatory remarks about the employer, its servants or agents, and a reciprocal clause under which the employer undertakes to use its best endeavours to prevent its servants or agents from making derogatory remarks about the employee.
Problems only arise where an employer seeks to extend the scope of the confidentiality clauses too far, to the point where they seek to prevent the employee from raising legitimate concerns that are in the public interest. That is when assertions are sometimes made that they amount to “gagging clauses“. However, any clause(s) that sought to do that would be void and unenforceable anyway, and the employer will have wasted their money if that was the objective behind them offering the settlement agreement. That is because an employee is entitled to make a protected disclosure (i.e. whistleblowing in relation to criminal activity, non-compliance with a legal duty, etc) under the Public Interest Disclosure Act (PIDA) 1998 (as amended by the Enterprise and Regulatory Reform Act 2013). Under that Act, an employee can make a protected disclosure against their employer so long as they have a reasonable belief that disclosure is in the public interest. The right to make protected disclosures overrides confidentiality clauses contained in any settlement agreement that attempts to constrain/restrict that right, thereby rendering that part of the confidentiality clause(s) as void and unenforceable.
Accordingly, when drafting the confidentiality clauses for a settlement agreement, it is essential to ensure that they are appropriate given the circumstances, and that they are compliant with the PIDA 1998. In that respect, it should be made explicitly clear within the settlement agreement that the confidentiality clauses do not prevent the employee from raising legitimate concerns that are in the public interest, and that they do not either override, supersede, or supplant their rights to speak out/provide disclosure under PIDA 1998.
The definition of ‘gagging order‘ is an official order not to disclose certain information, an order which can be legally enforced. When one uses the term “gagging order” in certain conspiratorial contexts, it is implied that information is being suppressed that ought to be made public, but which is being prevented from being disclosed due to a legally enforceable order. However, confidentiality provisions contained in settlement agreements cannot be viewed as ‘gagging orders‘ in that sense because any employer who tried to prevent an employee from disclosing matters that were in the public interest would find that the clauses were completely unenforceable. The only information which remains confidential under a settlement agreement is that which is only of interest to the employer and employee, and which has no wider legitimate interest to anybody else outside of the parties to the agreement. To be able to legitimately make a protected disclosure and not be bound by the confidentiality clause(s) contained in the settlement agreement, the employee would simply need to be able to show that they had a reasonable belief that a disclosure in relation to a criminal offence, or a failure to comply with a legal obligation, or a miscarriage of justice, or a risk to health and safety, or damage to the environment, or a deliberate cover-up into any of the aforementioned, was in the public interest.
Accordingly, in relation to the 145 settlement agreements that Devon County Council entered in to, were any protected disclosures to be made by employees, then the employees could not be ‘gagged‘ and prevented from doing so by any confidentiality clauses contained in the settlement agreements.
Hence, the only sense in which confidentiality clauses contained in settlement agreements can be viewed as so called ‘gagging clauses‘ is in the very narrow and limited sense that it prevents the employer and employee from discussing the terms of the employees departure. However, as stated, used properly, such confidentiality clauses are mutually beneficial for both employer and employee in terms of protecting both of their legitimate interests. In that respect, both confidentiality clauses and settlement agreements in general have a legitimate role to play in resolving employment disputes, and avoiding the need to take the matter to an employment tribunal or the civil courts. Used in this very narrow and limited sense, why even use emotive language like ‘gagging orders‘ given the loaded connotations that come with it? They are what they are – confidentiality clauses designed to benefit both employer and employee.