Opening up non-disclosure agreements

P.E.I. legislation part of growing trend to better protect employees

Opening up non-disclosure agreements

Non-disclosure agreements (NDAs) have been around for decades. Intended to keep confidential information private, such as trade secrets, they can provide employers with protection and a competitive advantage.

The agreements are also used when allegations of harassment arise, as employers are keen to avoid details of any accusations from being disclosed, along with the terms of any settlement.

But with the rise of the #MeToo movement, NDAs have come under greater scrutiny because of the potential harm to employees who are effectively muzzled, which means they may miss out on much-needed supports — while the harasser is protected.

To that end, Prince Edward Island has become the first jurisdiction in Canada to limit the use of these agreements in cases of discrimination and harassment. The new law, Bill 118, will take effect in May and states that NDAs are only permitted when it is “the expressed wish and preference of the relevant person concerned,” meaning someone who has experienced or made allegations about harassment or discrimination.

Similarly, the recently passed “Silenced No More Act” in California is meant to make it easier for workers to speak out about harassment and abuse at work, even if they sign NDAs.

One of the prevailing arguments against NDAs for cases of harassment from those that oppose them is that they promote a culture of silence, says Natasha Savoline, lawyer and human resource advisor at Bernardi HR Lawyers in Mississauga, Ont.

“So to say to a survivor ‘You can't talk about it,’ I mean, that's part of the healing process for a lot of people as well.”

“The other concern is that it allows the behaviour potentially to continue… If we're silent, we're not protecting others from potentially being subjected to the same thing.”

Why are NDAs used?

An extremely high percentage of settlements between employees and employers contains some version of an NDA, says Andrew Monkhouse, managing partner at Monkhouse Law Employment Lawyers in Toronto.

Usually, the NDA is either a confidentiality clause, where someone is not allowed to discuss the circumstances or amounts of a settlement, or a non-disparagement clause, where employees who have been terminated agree to not disparage the company going forward, he says.

“There's a culture — from what I can see — of employers asking for these types of NDAs in virtually all claims… whether or not they are applicable, they're just seen as good and therefore asked for, in almost all cases.”

For harassment cases, these agreements are really about not having people out there talking about it “and potentially affecting the integrity of the evidence and influencing the findings,” says Savoline.

And there can be a lot of variation in the agreements, such as a mutual confidentiality provision, where nobody is going to talk about it on either side, and financial repercussions for breaching it, she says.

“As well, you could see variation in terms of what you are and aren't able to talk about. So maybe you can talk about the ultimate finding, but not the facts. And… if there was a financial settlement, you can't disclose anything around the amount or that there was any financial settlement.”

Ultimately, it should be about looking out for the wellness of all parties, says Savoline.

“I think that's a great way to approach it, to try to find a balance between everybody's needs to compromise, that doesn't silence people, because that causes more harm.”

If challenged, most restrictive covenants will be ruled unenforceable by courts because many organizations make avoidable mistakes when setting limits on post-employment activity, says another legal expert.

Potential downsides to NDAs

One problematic trend is this idea of using NDAs in almost all incidents, says Monkhouse, citing as an example New York City mayor Mike Bloomberg, who used NDAs to prevent women speaking out about his alleged history of inappropriate behaviour — and was shamed about it by Sen. Elizabeth Warren back in 2020.

“There's a real question about how important those NDAs actually are, or if it's something that companies demand just because they can…. I think that there could be more thought put towards whether or not a situation truly requires an NDA.”

If you hear a company has forced all of its employees to sign gag orders, that’s not going to improve your opinion of the company, he says.

“That's similar to non-competition clauses, where a lot of non-competition clauses were not valid under Canadian law, they weren't enforceable, but many companies put them in as a chilling effect.”

Confidentiality provisions were in the spotlight several years ago when former Globe and Mail writer Jan Wong was ordered to repay her settlement after breaching a confidentiality agreement with the newspaper.

Enforceability considerations

As for crafting an NDA, it really depends on the nature of the behaviour involved, says Savoline.

“The more serious the behaviour, I think it's less fair to ask somebody who's been a victim of that or survivor of that to not speak about their experience and take that right away from them. I think the more egregious it is, the more unfair it becomes to put somebody in that position.”

If, however, it’s less serious behaviour, an NDA might make more sense, she says.

“There may be more of a case [if] somebody hasn’t intentionally done something and acted in an inappropriate way, they learned the lesson, reformed a bit and there's been some changes to the behaviour. And so [having an NDA] takes away the opportunity for somebody to reform themselves and move on.”

One big factor to consider in all this is anti-SLAPP (strategic litigation against public participation) legislation, as seen in Ontario, says Monkhouse.

“What that means is that, generally, people are allowed to express themselves under the anti-SLAPP legislation on matters of public importance, without fear of repercussion by being sued for doing that,” he says.

“Let's say there was a claim filed against them for allegedly breaching the NDA — they could potentially defend themselves on the idea that this is anti-SLAPP, so that the person is trying to shut down a legitimate discussion. You get all of your legal fees covered if you win; but if you don't win, usually you don't have a cost award against you.”

This has been used by whistleblowers in the past, says Monkhouse, citing the 2019 Ontario Superior Court case Joshi v. Allstate, where a former employee filed a wrongful dismissal suit, and then the employer filed a lawsuit claiming defamation.

“We were able to have the lawsuit against her dismissed insofar as she was a whistleblower, as a matter of public importance,” he says.

One final consideration? All of the claims that are made in Superior Court are publicly available, says Monkhouse.

“When you settle a case, you don't go and get rid of those statements of claim — those claims that have been filed, they remain in the public record and they could still be searched by anybody.”

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