The Treasury has rejected recommendations published in the “Sexism in the City” report to prohibit the use of non-disclosure agreements in sexual harassment cases in the financial services sector. 

Published in March of this year, the Treasury Select Committee’s report revealed that the significant barriers and challenges faced by women in the industry persist. The prevalence of sexual harassment was a particular focus of the report. This prompted a call for the total ban of non-disclosure agreements (NDAs) in such cases. In an employment context, NDAs frequently form part of settlement agreements, but against the backdrop of the #MeToo movement, some of these agreements were found to be so punitive that women felt constrained from reporting sexual misconduct to the police or regulatory bodies. 

Treasury response

The Treasury have since responded to the report. They argue that there remains a “legitimate place” for these agreements in protecting commercially sensitive information. The Treasury also noted the value confidentiality clauses can bring to employees who sign settlement agreements to ensure a clear break from the incident - presumably only when such clauses are mutual.

Despite the decision to not support the recommendations, the Treasury referenced the government's commitment to legislate against the enforceability of NDAs if they prevent harassment victims from reporting a criminal offence. They contend that this will build on the existing legal limits to NDAs generally, where agreement terms are likely void and unenforceable to the extent that they seek to stop employees cooperating with the police, lawyers or courts in a criminal investigation. 

Comment from the FCA

The Select Committee's report had also called on the FCA to assist in providing a clearer picture on the use of NDAs in financial services harassment cases. However, the CEO of the FCA, Nikhil Rathi, had previously cautioned on the limits to the regulator’s ability to hold financial services to a higher standard than that set by the government for the whole economy. In that context, it is unsurprising that their response was somewhat muted. Citing their recent non-financial misconduct survey in the insurance and banking sectors as their current focus, the FCA only hinted that further surveys into other sectors of the industry could take place in the future.  

with thanks to Georgia Hanson, Trainee Solicitor, for her help this piece