New restrictions regulating the use in an employment context of non-disclosure provisions and agreements came into effect on 20 November 2024.
Under the Maternity Protection, Employment Equality and Preservation of Certain Records Act 2024 (the 2024 Act), a non-disclosure agreement or a non-disclosure clause in a broader agreement (NDA), is void if it does not comply with these restrictions.
In the employment context, severance and compromise agreements routinely include non-disclosure provisions, whereby the parties undertake not to disclose any detail about the circumstances in which or the terms upon which the employment relationship was concluded, or any confidential information relating to the employment. These non-disclosure obligations have, up to now, typically been subject to very limited express carve-outs, such as permitting the taking of legal or tax advice or permitting protected disclosures or certain disclosures to a regulator.
The 2024 Act prohibits non-disclosure obligations that would prevent an employer or an employee from disclosing information to anyone about allegations of discrimination, harassment, sexual harassment or victimisation, or any steps taken by the employer or the employee in relation to such allegations (a Relevant Disclosure).
In practice, compliance with the 2024 Act will require employers to use appropriate carve-out wording, to permit the making of Relevant Disclosures, when drafting NDA (and other relevant) clauses in severance and compromise agreements, as well as in employment contractual documentation more generally.
Exceptions
Certain NDAs are outside of the scope of the general prohibition in the 2024 Act. However, the categories of NDA which can lawfully restrict an employee’s ability to make a Relevant Disclosure are very limited. An NDA which:
- forms part of a mediated resolution under the formal Workplace Relations Commission mediation framework; or
- is entered into at the request of the employee (an Excepted NDA),
is not subject to the general prohibition.
These exceptions are unlikely to be available in most scenarios in which an employer and employee might enter an NDA.
To constitute an Excepted NDA, an agreement must meet certain additional procedural conditions and requirements as to its format. In circumstances where an NDA constitutes an Excepted NDA, the employee must be free to make a Relevant Disclosure to prescribed individuals acting in a professional capacity.
Comment
One interesting aspect of the new requirements is that the 2024 Act does not define a “Relevant Disclosure” by reference to allegations already raised by the employee at the time an NDA is entered into. The prohibition, as defined, is broad enough to capture allegations the employer has no awareness of when entering the NDA.
The restrictions the 2024 Act imposes on the scope of NDAs will materially impact the degree of control and certainty employers can have about confidentiality in the context of severance or compromise agreements. Until now, employers have seen non-disclosure as a crucial element of the exchange involved in concluding these agreements. In parallel with securing a full and final settlement or waiver of claims and liabilities for the agreed consideration, employers generally seek, through non-disclosure obligations, to close the risk of leakage of sensitive information and PR risk. The 2024 Act does not prevent an employer from securing the settlement or waiver of claims and liabilities but does significantly impact an employer’s ability to close PR and leakage risk.
Employers should review and update the non-disclosure wording in their relevant agreements to ensure compliance with the 2024 Act.
Please speak to a member of our Employment & Benefits team or your usual William Fry contact if you have a query or would like further information.