Considerations before imposing abject ban on non-disclosure agreements

By Ellen Low

Law360 Canada (December 1, 2023, 11:14 AM EST) --
Ellen Low
Ellen Low
Talk of a ban on the use of non-disclosure agreements (NDAs) in cases of workplace sexual harassment, misconduct or violence may be well-intentioned but requires careful and deliberate consideration.

The Ontario government recently proposed changes to the Working for Workers Act and announced it will also be launching consultations to restrict the use of NDAs.

Of course, a call to ban non-disclosure agreements is not new. There are provinces across Canada that have some sort of NDA legislation in place. There is legislation that effectively limits or truncates when a non-disclosure agreement can apply and now Ontario is also looking into whether a prohibition against NDAs is a good idea.

Understandably, but I am concerned about the possibility of applying an abject ban on something that can otherwise relatively easily be negotiated and discussed in good faith. An NDA does not have to be a full-stop gag order.

It is important to look at the issue in a broader sense. The first thing to understand is that at present, in Ontario, you cannot sue for “harassment.” It is not a tort that has been recognized in this province. A victim of workplace sex-based harassment might then consider suing the individual for the conduct, but also their workplace, for discrimination under the Ontario Human Rights Code (HRC) or for a breach of Occupational Health and Safety Act provisions, as both the perpetrator and the employer can be held liable for harassment.

From a human rights perspective, the employer is very much responsible for some of the conduct committed by an employee. There is a long-established line of case law at the Human Rights Tribunal of Ontario (HRTO) that holds that an organization may be liable for acts of harassment carried out by its employees in a number of circumstances.

The employer can be held liable if the corporation knew or reasonably should have known about the harassment and failed to take steps to respond. Another reason to seek a remedy from the employer is if the conduct created “a sexually poisoned work environment,” which is a free-standing violation of the HRC. The employer can also be liable where the employee is a “directing mind” of the organization.

Often in cases where workplace harassment can be proven, the perpetrator and/or the employer will agree to a settlement in exchange for a non-disclosure agreement. Traditionally, the NDA would say something to the effect of “the victim of the harassment cannot speak about the events or experience giving rise to the settlement.”

And that seems to be the primary reason there is talk of banning non-disclosure agreements altogether — that they are too often seen as silencing victims of sex-based harassment in the workplace in exchange for compensation.

There also seems to be a prevailing theory that people are entering into settlement agreements which prevent them from speaking about their experience at all. However, there is the view that other people who experienced something similar should be able to contact former victims in order to bolster their own cases or validate their own experience. Victims of harassment should be free to speak about their experiences if they so choose without the risk of being in breach of a settlement agreement that comes with financial consequences.

The needs and wants of the individual complainant should be considered when deciding whether a blanket probation is appropriate, but an outright ban is unnecessary.

If the parties are able to achieve an early settlement without a trial or hearing, there is going to be some kind of agreement in exchange for compensation, but it doesn't mean the complainant must sign a blanket NDA saying they can never talk about it for any reason. Our firm has had a great deal of success doing truncated or abridged NDAs that specifically contemplate the ability to speak about the experience in different circumstances.

For example, we might agree not to talk about the amount of compensation that is being received but the victim would be permitted to talk about the events without directly naming the employer. You could also contemplate what is known as a sunset clause so nobody can talk about what happened for a certain number of years.

Another option might be to include a specific “carve-out” so if a third party approaches the victim with specific questions about working for the employer, or with an individual employee, they would be permitted to share their experience.

Overall, there is a legitimate concern about the possible chilling effect a blanket ban on non-disclosure agreements could have on harassment claims. While NDAs can deprive a victim of the right to speak about their experience, a published decision may rob them of the right to remain anonymous, or to simply get on with their lives. It further removes a sense of personal agency from a population that has already had its rights violated.

There are serious concerns that an outright ban could further drive inappropriate conduct underground because people won’t want to report it if they don't necessarily understand the application of the legislation and if they believe it to mean that to get a resolution or justice they will have to participate in protracted, and public proceedings.

While perpetrators should not be allowed to hide in the shadows, NDAs can provide victims with real justice. An outright ban could conceivably make it significantly more difficult to settle a case. Without NDAs there will be perpetrators who will likely not want to admit liability for their conduct. And the employer is realistically not going to want to settle because the employee could then go and say whatever they want.

There are a number of different avenues to consider without necessarily banning non-disclosure agreements to seek redress for someone who has experienced workplace sex harassment or harassment of any kind.

Ellen Low has been working exclusively in employment and human rights for over a decade. She obtained her law degree from the University of Ottawa, articled at Gowlings and practised as a partner with a boutique Toronto employment law firm and founded her own firm, Ellen Low & Co. Employment Law, in 2018.

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