Gagging clauses are lawful and enforceable

This article was first published by People Management, the official magazine of the CIPD

Periodically the topic of gagging clauses resurfaces in the press. In 2013 the revelation of large numbers of NHS employees entering into such agreements produced a mass of publicity. Interest in the topic duly stimulated, it led to recommendations by the Public Accounts Committee in the House of Commons that revised guidance from the Cabinet Office should require public sector organisations to secure approval from the Cabinet Office for special severance payments and associated compromise agreements where they relate to cases of whistleblowing. 

Confidentiality clauses commonly govern and restrain the use of confidential information obtained in the course of employment both during the contract and it has ended. Such clauses are lawful and in principle enforceable. However this article is not about these clauses but rather those provisions frequently inserted into settlement or compromise agreements, confusingly often termed confidentiality agreements or confidentiality clauses, which seek to keep from public exposure the nature of the settlement, the amount of money paid to the departed employee and the factual circumstances leading up to the termination.    

Gagging clauses do not of course only arise in the case of public sector employees or other whistleblowers. In a very different employment context, consider the former England cricketer Kevin Pietersen whose central contract with England was terminated on terms which included a time-limited gagging clause – thereby boosting substantially the publicity preceding the release last month of his account of events leading up to his departure from the England setup.

Most recently the BBC has figured in prominent headlines in the context of allegations made by Olenka Frenkiel of age discrimination in relation to women reporters – see The Guardian 8 November 2014. So it seems apposite now to examine what a gagging clause is and how it operates.

The colloquial gagging clause is nothing more than a provision in an agreement, very frequently a settlement agreement, at the end of an employment relationship whereby an employee agrees, with or without any time limit, not to reveal the details of the settlement including, most obviously, any sums received by the terminated employee and any factual history leading up to the termination.

Subject to the issue of whistleblowing, gagging clauses are neither unlawful nor void but are enforceable. In some circumstances, should the employer learn in advance of an intention by the employee to break the terms of the provision, that enforcement could be effected by injunction or by a claim for damages or repayment of sums paid in whole or in part under the settlement agreement.

Compromising existing or anticipated litigation is an attractive outcome for the parties involved not only because of the saving in legal costs and time, and by avoiding the stress of a hearing but also because of the elimination of risk. If you are an employer facing a significant claim which the tribunal or court may award to a Claimant employee, settling the claim for less, sometimes substantially less, than that makes good commercial sense. The risk of having to pay a significant sum is removed and replaced by the certainty of paying a lower figure.

Also, no tribunal or court will, by order, prevent a successful Claimant from revealing to the world and, perhaps more importantly and with more damaging consequences from the employer's perspective, his or her fellow former employees how much he or she has been awarded. To do so would undermine a cardinal feature of open justice. Whilst an unsuccessful employer cannot prevent details of the dispute entering the public domain, the same also applies to a successful employer who defeats the claim. Subject to those rare and exceptional cases where a tribunal has the power to restrict publicity, confined mostly to sexual misconduct or where other sensitive personal information is in evidence, all the dirty linen washed in public can be fully exposed.

The considerable incentive to settle is therefore made even more compelling when the employer can demand from an employee a gagging clause as part of the deal. No doubt some employers are prepared to pay more than the claim is worth to obtain that benefit. Of course, no employee who has been dismissed or discriminated against is bound to accept the gagging clause if that is asked for and insisted upon. If that is the choice made, then the claim may be abandoned or settled without such a clause or the dispute can be litigated to a conclusion – when no power exists to stop prevent publication of the details.

Olenka Frenkiel refused to sign a gagging agreement and stated:

"I have one message for those going through these battles. Refuse to sign the gagging clauses. You can. Some of us have. And that will end the free ride managers have enjoyed until now."

What is not revealed is whether or not any settlement was reached or the terms on which she left her long-standing employment with the BBC.

Whilst gagging clauses are for the most part enforceable as contractual terms, any clause in a settlement or compromise agreement is void in so far as it purports to preclude a worker from making a protected disclosure – section 43J Employment Rights Act 1996. But if such a clause cannot legally be used to prevent a person from whistleblowing, no doubt some who have been offered, or accepted compromise agreements containing one have felt gagged. The best solution to this problem is to ensure that the gagging clause spells out that it does not prevent the employee from making a protected disclosure. That, however, may be precisely what the employer wants to achieve.