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Trusts spending £1m+ a year on settlement deals with gagging clauses

Published on: 1 Nov 2021

Trusts are still spending at least £1m a year on settlement agreements with staff containing ‘gagging clauses’ despite a crackdown on these conditions in recent years, HSJ research reveals.

Responses to a freedom of information request sent to all English NHS trusts – which asked for details of settlement agreements paid, including those which contained a non-disclosure agreement or clause – revealed 247 settlement agreements with such a clause or agreement between 2018-19 and 2020-21, with a total value of £4.6m.

The actual total could be higher as many trusts did not respond, while others claimed that an exemption in the legislation meant they did not have to provide the information. Some trusts provided a range of values, as opposed to precise figures. For these, we have taken the lower end of the range (eg for fewer than five settlements, we have counted one if the trust indicated money was paid out).

Some sources HSJ spoke to warned NDAs could be open to abuse, often coming at the end of a long process with “no equality of arms”. However, others noted confidentiality clauses were a standard part of settlement agreements, while some trusts’ FOI responses stressed their clauses would not prevent staff from making a public interest disclosure.

NDAs — which are also known as “confidentiality clauses” or “gagging clauses” and prevent parties to a settlement agreement from disclosing its details — also seem to be becoming less popular. HSJ’s FOIs revealed 119 settlement agreements with an NDA with a total value of £2.16m, in 2018-19. In 2019-20, this fell to 87 such agreements with a total value of £1.5m. In 2020-21, there were 41 settlement agreements with such a clause, with a total value of £1.04m.

A source with knowledge of confidentiality agreements in the NHS said: “Following some high-profile whistleblowing cases a few years ago… NHS organisations have been far more cautious in imposing confidentiality obligations in settlement agreements.”

HSJ’s FOIs also revealed that 861 settlement agreements — contracts used to settle disputes before they could potentially turn into litigation — worth £23.4m paid across all three years. Previous reporting has revealed almost £28m paid for settlement agreements between 2015 and 2018.

The five trusts which paid the most for settlement agreements with some sort of confidentiality clause across 2018 to 2021 were:

A political issue

Numerous health secretaries have issued warnings about NDAs potentially being used to silence staff. In 2019, former health and social care secretary Matt Hancock said: “Settlement agreements that infringe on an individual’s right to speak out for the benefit of patients are completely inappropriate.”

In 2013, then health secretary Jeremy Hunt said he would ban clauses in compromise agreements — as settlement agreements were then known — preventing NHS staff from raising patient safety concerns. After the Mid Staffordshire report was published, he wrote to all trust chairs, asking them to review the confidentiality clauses they were using.

In 1997, Labour health minister, and later health secretary, Alan Milburn moved to ban gagging clauses in NHS contracts, telling Parliament: “There can be no justification for an employer penalising staff who speak out about genuine concerns.”

Beyond the NHS, Conservative MP and former Commons women and equalities committee chair Maria Miller introduced a private members’ bill in  September, seeking to restrict NDA use. In 2019, the Department of Business, Energy and Industrial Strategy ran a consultation on the use of confidentiality clauses.

Roger Kline, a research fellow at Middlesex University Business School, told HSJ NDAs are “not really an agreement between equals”, adding: “These disclosure agreements come at the end of a long process… where [staff] feel they just have to get out.”

He said: “The risk is always the thing that sparked the agreement doesn’t get resolved – whether it was a safety issue, harassment, discrimination or bullying – and no assurance it can’t happen again.”

A partner in a City law firm with extensive experience advising NHS staff told HSJ: “[Settlement agreements often come] at the end of a process where there is nowhere left for the individual to go. Because settlement happens so late on in the process, the individual has often spent large amounts of money and gone through real trauma as a result of the process. It is often a war of attrition.

“Usually it is a case of somebody saying: ‘I’ve just got to get out’… There is no equality of arms in that process.”

An Equality and Human Rights Commission spokesperson added: “NDAs can be important tools to protect confidential information like trade secrets, but in the wrong hands they can be used to silence victims of discrimination or harassment and protect perpetrators. It is vital that the improper use of NDAs is stopped.”

Blowing the whistle

NDAs have not been able to legally be used to prevent an employee from whistleblowing since the Public Interest Disclosure Act 1998. The NHS standard contract also states NHS organisations should not use contractual terms which “prevent or inhibit…staff from speaking up about any concerns they may have in relation to the quality and/or safety of the care provided by their employer or by any other organisation”.

NHS Employers guidance on settlement agreements, updated in February 2019, recommends inserting wording which expressly states raising issues such as safety concerns is not prevented under agreements. In 2012, then NHS chief executive Sir David Nicholson also wrote to all trust chief executives and HR directors, stating compromise agreements “should make clear the right to make a protected disclosure is not affected”.

Andrew Pepper-Parsons, whistleblowing charity Protect’s head of policy, said: “The threat of gagging orders in the NHS cannot be solved by declaring them ‘outlawed’… The real underlying problem is that whistleblowers are often left confused when confronted by agreements with vague confidentiality terms.”

He added that Protect’s research indicated general public awareness of whistleblowing laws was low, so “in situations where whistleblowers need to escalate their concerns to a regulator, MPs or the media they can wrongly assume an NDA prevents them from raising it”.

Meanwhile, Alison Leary, chair of healthcare and workforce modelling at London South Bank University, said: “NDAs are often focussed on employment relationships so the spirit of public interest often seems lost. The statutory framework needs to be made clearer to address this.”

Jon Restell, chief executive of the Managers in Partnership trade union, said they believe settlement agreements between employer and employee can be an “effective way of drawing a line under an employment relationship”.

He added: “In our experience, scrutiny and governance around settlement agreements, especially any financial elements, is tight in the NHS. Employers may offer reasonable terms but they are never generous.”

Business as usual

However, many sources HSJ spoke to described confidentiality clauses as a standard part of settlement agreements.

NHS Employers chief executive Danny Mortimer added the FOI answers may have conflated “acceptable confidentiality clauses regarding the terms of the agreement itself, and unacceptable clauses which would prevent people from raising concerns through alternative routes including with the [Care Quality Commission] or [through] members of Parliament”.  He encouraged NHS organisations to follow NHS Employers’ guidance on settlement agreements

A source with knowledge of confidentiality agreements in the NHS added: “There is clearly a need for confidentiality obligations on both sides but these should be as narrow as possible.”

Meanwhile, the partner in a City law firm with extensive experience of advising NHS staff, told HSJ: “Sometimes [the employee] wants confidentiality. There can be sensitive personal information involved, particularly around disability, sexual harassment, sexual orientation and so on. Many people don’t want that in the public domain, and [think] ‘let’s just draw a line under it like adults and move on.’”

All of the five trusts named as having paid the most for settlement agreements with confidentiality clauses were contacted for comment. 

An East London FT spokesperson said: “ELFT does not use separate non-disclosure agreements to prevent staff from speaking up following a dispute. However, settlement agreements will usually contain a confidentiality clause in relation to the terms of the agreement itself. Any settlement agreements will expressly state that individuals remain free to make protected disclosures (and referrals to regulatory/appropriate statutory bodies) if they feel it necessary.” 

The Christie FT did not respond but its FOI response noted 23 of the settlement agreements were made in respect of its mutually agreed resignation scheme.

Wrightington, Wigan And Leigh FT declined to comment but its FOI response said the majority of settlements were related to its MARS and its confidentiality section “identifies where exemptions to this are appropriate in accordance with specific and legal rights of the individual and employer”. 

University Hospital of Derby and Burton FT declined to comment. Liverpool University Hospitals FT declined to comment on an initial inquiry but did not reply to a further inquiry.