Significant restrictions on non-disclosure agreements amongst new government amendments to the Employment Rights Bill

At a glance

• Further amendments have been published on the Employment Rights Bill (ERB).
• Non-disclosure agreements: Confidentiality clauses that prevent workers from disclosing or alleging workplace harassment or discrimination will be void, unless they meet specific conditions to be defined in future regulations.
• Fire and rehire adjustments: Restrictions have been narrowed to apply only to certain contract changes. Employers can still use fire and rehire for relocation. Dismissals to replace employees with non-employees will now be automatically unfair under certain conditions.
• Public sector exceptions tightened: Public sector employers face stricter tests to justify fire and rehire, with financial hardship needing to threaten statutory functions or trigger formal intervention (for local authorities).
• Bereavement leave expanded: Bereavement leave will now cover pregnancy loss before 24 weeks, including failed IVF.
• Zero hours contracts: Provisions for guaranteed hours for zero and low-hours workers have become more complex, especially for agency workers.

As the ERB approaches its final stages before Royal Assent, further amendments have been published. The government amendments, which will almost certainly be passed due to the size of the Labour majority, include the following significant changes:

Confidentiality / Non-disclosure agreements

Any provision in an agreement between an employer and a worker will be void where it attempts to prevent the worker from making an allegation or disclosure relating to work-related harassment or discrimination. There will be exceptions for an ‘excepted agreement’ which meets conditions to be specified in regulations.

Previous governments had proposed more limited reforms to confidentiality clauses (government outlines its proposals for reforms to confidentiality clauses (NDAs) – Be Aware UK, The spotlight on NDAs intensifies as Government publishes proposals for reform – Be Aware UK) but these were not taken forward.

If passed, these rules will mean that any confidentiality clauses in employment contracts, settlement agreements or other agreements that seek to prevent a worker speaking about an allegation of harassment or discrimination will be null and void.

It remains to be seen what the conditions for an excepted agreement will be and how these will differ from the existing conditions for a valid settlement agreement.

This may have unintended consequences as employers are likely to be less inclined to settle claims which they believe they have a reasonable chance of defending if they cannot rely on confidentiality provisions to discourage allegations (which my be unfounded) being aired more widely.

Fire and rehire

The restrictions on dismissal and re-engagement (fire and rehire) have been watered down. As originally drafted, it would be automatically unfair to dismiss someone either for refusing to agree to a variation in their contract of employment or in order to replace them with someone on varied terms and conditions doing essentially the same work. However, under the new amendments, the restrictions will only apply to restricted variations of the employment contract, which will include reductions in an employee’s pay or time off, changes to the number of hours an employee is required to work and changes to pensions. Crucially, changes to an employee’s workplace will not be restricted variations, meaning that employers will still be able to use fire and rehire to relocate a business, subject to the ordinary unfair dismissal regime.

As originally drafted the fire and rehire provisions would not apply in a situation where the employer seeks to make changes by dismissing its employees and replacing them with people who are not employees – such as agency workers. This will also be changed, so that a dismissal will be automatically unfair where an employer dismisses employees for the principal reason of replacing them with people who are not employees, provided the new individual is carrying out substantially the same activities as the employee and the dismissal is not wholly or mainly attributable to the fact that the employer’s need for those activities has ceased or diminished.

Where an employer seeks to make a contract variation which is not a restricted variation, the ERB now sets out the matters which the tribunal must consider in determining whether dismissal was reasonable, but these do not appreciably change the current test of reasonableness.

The fire and rehire provisions have also been amended in respect of public sector employers. Currently, the only exception to the rule that dismissal for refusing to agree to a restricted variation is automatically unfair is that the employer is facing ‘financial difficulties’ that affect its ability to carry on its business. Under the amendments, the financial difficulties exception will no longer apply to the public sector and two new tests will apply – one for public sector bodies generally and one specifically for local authorities.

For public sector bodies generally, the exception will apply if the employer faces financial difficulties that are likely in the immediate future to affect ‘the financial sustainability of carrying out the employer’s statutory functions’. For local authorities the  exception will apply if financial difficulties have resulted in a ‘relevant intervention direction’ relating to the financial management or governance of the authority.

The restrictions on fire and rehire will still be very stringent, but the amendments do offer employers some much-needed flexibility.

Bereavement leave for pregnancy loss

The ERB will enable bereavement leave to be extended to parents who suffer a stillbirth or loss of a child before 24 weeks of pregnancy, including failed IVF implantation.

Zero hours contracts – guaranteed hours

The provisions relating to guaranteed hours for zero and low hours workers have been made even more complicated, particularly regarding how they apply to agency workers.