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In the Hot Seat: Non-Disclosure Agreements in Cases of Sexual Violence

On November 4, 2021 Green Party opposition leader Lynne Lund introduced the Non-Disclosure Agreements Act in Prince Edward Island’s provincial legislature. This is a bold step that I expect will be followed in other parts of Canada.

The proposed PEI legislation restricts the use and content of non-disclosure agreements (“NDAs”) in cases of sexual harassment and discrimination in all out-of-court settlements where the survivor does not want it.[1] If passed, this legislation would be the very first time that a non-disclosure agreement is subject to any kind of regulation in Canada.

Background and Context

Confidentiality clauses or NDAs in out-of-court settlements in cases of sexual violence – which includes sexual abuse, assault, and/or harassment – have been hotly contested for decades. They have long been used to “gag” and silence survivors of sexual violence, conceal wrongful conduct of perpetrators, and protect powerful individuals and entities, including employers and religious institutions.

In the era of #MeToo and the Harvey Weinstein scandal, NDAs have become particularly notorious, and the criticism of these silencing tools has become far more widespread.

In response to the media scrutiny and exposure of NDAs, legislators have been pressured to take concrete action. Many jurisdictions, primarily in the United States, have moved to restrict or prohibit the secrecy NDAs force upon survivors, primarily in the employment context.

The legislation proposed by Ms. Lund is the first of its kind in Canada. It is modelled on Ireland’s draft Employment Equality (Amendment) (Non-Disclosure Agreements) Bill expected to go into second reading in early 2022.[2] While there are few details available, a similar bill is expected to be introduced by Senator Marilou McPhedran at the federal level.

Other jurisdictions, including the United Kingdom and Australia, are also considering legislation that restricts the use and content of NDAs.

The potential for such legislative reform at both the provincial and federal level in Canada, suggests a renewed commitment to prohibiting the use of NDAs in cases of sexual abuse. With NDAs back in the hot seat, one must ask: how far will this effort go?

Taking a Step Back: What’s Wrong with NDAs?

It is well-known that a majority of civil actions, including cases of sexual abuse and sexual harassment, end in a private settlement between the parties, and not in a public court setting. While a carefully drafted non-disclosure agreement has the potential of serving all parties involved, they often perpetuate harmful conduct against survivors of sexual violence.

Specifically, NDAs that prevent survivors from sharing their experiences of sexual violence can interfere with a survivor’s healing process, and impact how they are able to move forward.

Healing is not a linear process and strategies used may be unique to each survivor. Some survivors may choose to share their stories immediately; others may not be prepared to share until later in life, if at all. However, a restrictive NDA signed years prior may eliminate such an opportunity. Although some NDAs may carve out exceptions and specify who a survivor can discuss their experiences with, such as a partner, immediate family, and/or medical professional(s), this may not be enough. The restriction on who they can say what to – or, in other words, their freedom of expression – can perpetuate the harms they suffered as a result of the abuse and, in many cases, can also leave survivors with the feeling that justice has not been served.

In effect, then, the continued presence of such broad NDAs protects the reputation of perpetrators, employers, and/or organizations, rather than survivors of sexual violence themselves.

This highlights a bigger problem:

Many survivors of sexual violence do not come forward due to feelings of shame, guilt, and a fear for their safety or reputation. Often, this is rooted in well-known historical and contemporary stereotypes and myths about sexual violence.

The ability of survivors who have taken action against perpetrators to speak about and share their experiences can encourage others to come forward and take action. However, if survivors of sexual violence who have already come forward are forced into silence through NDAs, other survivors may not come forward with their experiences as they may be unaware of the extent and prevalence of sexual violence and lack the necessary support and resources.

This allows perpetrators to continue their abuse and harassment, thereby limiting accountability and, ultimately, change.

Recognizing that NDAs, initially created to protect trade secrets and proprietary corporate information, have been weaponized against survivors of sexual violence to impose secrecy and silence them means that it is time that our law-makers intervene by restricting the use and content of NDAs through legislation.

Creating Change: Legislation Restricting the Use of NDAs

Many jurisdictions in the United States moved to enact legislation restricting the use and content of NDAs following the #MeToo movement. As noted, nearly all of the jurisdictions that have passed or introduced such legislation have done so in the employment context. The exception is California, and most recently, PEI.

In 2018, California passed the Stand Together Against Non-Disclosures Act (“STAND Act”), which amended California’s Code of Civil Procedure to prohibit a settlement agreement from preventing the disclosure of factual information related to specific “acts” in certain civil or administrative claims in the context of sexual harassment, sexual assault, and sex discrimination.[3] This was expanded on October 7, 2021, as Governor Gavin Newsom signed the Silenced No More Act into law.[4] The Silenced No More Act builds on the STAND Act by expanding anti-NDA protections to apply to all forms of harassment, discrimination, and retaliation in the employment context, rather than only sexual harassment, sexual assault, and sex discrimination.

The Non-Disclosure Agreements Act proposed in PEI would prohibit the use of NDAs in cases where sexual harassment or discrimination has occurred or been alleged to have occurred, and where the NDA has the “purpose or effect of concealing the details relating to a complaint of discrimination or harassment”, where such an agreement is not the preference of the victim.[5]

The proposed legislation would also:

  • Establish the permitted and required content of a non-disclosure agreement;
  • Protect and support survivors who, in relation to an incident of sexual harassment or misconduct, make disclosure to law enforcement authorities, regulated health and care professions, legal professions, or close contacts; and
  • Create penalties for those who do not comply with the legislation.

Some jurisdictions in the United States which have passed legislation regulating NDAs, including New York State, New Jersey, and Maryland, have distinguished between confidentiality of the fact and terms of settlement, and the underlying allegations.

Ms. Lund’s proposed legislation does not explicitly make such a distinction. However, the legislation does provide that “nothing in this section prohibits the inclusion or enforcement of a provision in a settlement agreement that precludes the disclosure of the amount paid in the settlement of a claim”,[6] suggesting that it is possible for settlement amounts paid as part of an agreement to remain confidential.

Ultimately, it remains to be seen how the Green Party’s proposed legislation will be received on the floor, and whether it or some variation of it will pass into law.

Balancing Interests: How Far Will These Efforts Go?

As noted, with the exception of California and PEI, most jurisdictions that have enacted or introduced legislation restricting the use and content of NDAs have focused exclusively on the employment context. This may be for various reasons, including the fact that the widespread scrutiny of NDAs arose out of employment-related scandals and, therefore, NDAs are thought to be more frequent in employment-related contexts. It may also be because regulating the use and content of NDAs beyond the employment context may be considered “too far” for stakeholders and lawmakers.

Nevertheless, expanding this protective legislation beyond the employment context is imperative. Regardless of the context in which they appear, NDAs can be and are often used to unfairly silence survivors. Although it is reassuring that Ms. Lund’s proposed legislation applies beyond the employment context, whether or not it will ultimately be passed, let alone with such broad application, remains to be seen.

Simultaneously, it is important recognize that settlement of a dispute is generally a positive outcome and it takes two, or more, to settle. Defendants in court cases and, equally, potential defendants who want to avoid being named in a civil lawsuit, need to continue to see a benefit in settling.

One way to ensure that they continue to see settlement as an attractive option is for legislation to distinguish between the fact and terms of settlement, versus the underlying allegations. Some jurisdictions in the United States have recognized this distinction in their statutes, and allowed confidentiality over the fact and terms of settlement.

Doing this may balance competing interests by protecting the right of survivors to share their experiences, while also ensuring that defendants and potential defendants have a sense of finality and closure. Without this, many may choose litigation through the court system and all the risks and expense it entails over settlement.

Ultimately, whether or not the enactment of restrictive legislation will go far enough in protecting survivors of sexual violence who want to settle out of court remains to be seen.

However, I believe it is a step in the right direction, as such legislation will help protect survivors and hold those who perpetrated and enabled the violence against them accountable. It will also encourage survivors to share their stories, foster public dialogue and education, and by doing so, hopefully reduce the prevalence of sexual violence in society.

 


[1] Bill No. 118, Non-Disclosure Agreements Act, 2nd Sess, 66 Leg, Prince Edward Island, 2021 [“Bill 118”].

[2] Employment Equality (Amendment) (Non-Disclosure Agreements) Bill 2021 (Ireland).

[3] Code of Civil Procedure, Chapter 3.5. Confidential Settlement Agreements, § 1001 (California).

[4] Senate Bill No. 331, Chapter 683: An Act to Amend Section 1001 of the Code of Civil Procedure, and to amend Section 12964.5 of the Government Code, relating to civil actions (California).

[5] Bill 118, s. 4(1).

[6] Bill 118, s. 4(10).

Zahra Vaid

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