However, given how broadly the FCA proposes to define non-financial misconduct, any outright ban on the use of NDAs in this broad category of cases must be carefully considered to avoid unfair outcomes for those who are the subjects of complaints.
If an individual is accused of, for example, bullying behaviour by criticising a team member in a manner that causes them to feel disrespected (which may fall within the definition of non-financial misconduct according to the FCA’s proposed redefinition of that term), but cleared following an investigation, should their employer not be permitted to use an NDA to prevent the bullying allegations from being repeated?
If not, such allegations may cause long-term damage to the career of the individual who has been accused.
One would hope that any regulation to restrict the use of confidentiality clauses in cases of non-financial misconduct, so broadly defined, will recognise that facts can be complicated, with actions sometimes perceived in unintended ways, and respect the balance of fairness in these sensitive situations.
In its guidance concerning the provision of regulatory references by firms, the FCA stipulates that firms need not include “information that has not been properly verified” in a reference, to ensure fairness to the subject of the reference.
In a world where reputations are often built and broken via media far less formal than employment references, the same balanced approach should be adopted to the regulation of confidentiality clauses concerning reports of non-financial misconduct.
Polly James is a partner and Katherine Pope is a senior associate at law firm BCLP
