Gagging clauses – what are they? An explanation

Chris Hadrill, partner in the employment team at Redmans, explains what “gagging clauses” are, what they are used for, and what makes these clauses so controversial

What is a “gagging clause”?

A “gagging clause” is the colloquial term commonly used in the media to describe confidentiality obligations under a contract (normally a ‘settlement agreement’). These clauses normally impose an obligation on one or more parties not to disclose particular information to third parties – they normally preclude one (or more) of the parties to the agreement from disclosing the existence, terms or circumstances of the agreement.

What are “gagging clauses” used for?

Gagging clauses are normally used to prevent one or more parties to an agreement from disclosing particular information, as identified above. There are many reasons why a party (normally an employer with settlement agreements) would want to prevent an employee from disclosing the existence or terms of a settlement agreement – this can range from a desire to ensure that potentially embarrassing facts are kept as secret as possible, to ensure that other employees don’t use the terms negotiated as a precedent if they’re seeking to negotiate their own deal, and to ensure that morale in a department isn’t damaged by the deal.

Who most commonly uses “gagging clauses”?

In the context of settlement agreements “gagging clauses” are most commonly used by employers seeking to prevent employees (and other third parties) from disclosing to the public the existence, terms and effect of the relevant settlement agreement.

Why are these clauses so controversial?

“Gagging clauses” have proved controversial for a variety of reasons, including:

  1. They, on a broad level, seek to impose swingeing restrictions on an employee’s freedom of speech
  2. They can sometimes be used to prevent disclosure of criminal wrongdoing or regulatory breaches (for example, victims of sexual harassment at work may be required to agree not to disclose the circumstances of the harassment they suffered in order to obtain a payout; equally there has been concern that public bodies such as the NHS may be using, or may have used, confidentiality restrictions in order to prevent the publication of legitimate concerns about public safety)
  3. The ability of the employer to impose powerful confidentiality clauses is strengthened by the nature of the power structures that exist within a workplace. Or, to put it another way, the employer has the resources to make life difficult for an employee if the employee is reluctant to agree to confidentiality restrictions (for example, the employer could withdraw the settlement agreement or refuse to pay a particular sum of money if the employee won’t agree to the confidentiality restrictions

Although concerns about how gagging clauses are used are legitimate, such clauses do serve an important function in limiting risk to all parties to an agreement (including, of course, reputational risk to employers). Given the importance of gagging clauses, rather than imposing a ban on the use of these clauses (as has been suggested by some national newspapers and public bodies), a more balanced view needs to be taken of the cost and benefit of ‘gagging clauses’ in particular situations – imposing ‘gagging clauses’ to prevent a victim of sexual harassment or a concerned doctor from disclosing their concerns to the proper authorities (or their lawyer or employer) is clearly wrong, but, equally, in some circumstances the victim of, for example, an incident of sexual harassment may wish to prevent details of the harassment from being made public. Banning ‘gagging clauses’ would therefore be a clumsy broadbrush measure which would prevent parties to settlement agreements from taking into account, and pricing, the risk and benefits of including confidentiality clauses in such agreements.

As a final point, it is also important to point out that under section 43K Employment Rights Act 1996 it is unlawful for employers to prevent employees from making protected disclosures (also known as ‘whistleblowing’) – this means that employers should not be able to rely on confidentiality clauses/’gagging clauses’ to prevent employees from, for example, disclosing criminal conduct on their employer’s part to the police or disclosing a regulatory breach to a regulator.