Canadian Employee Non-Disclosure Agreement: Soon to be Outlawed?
There has been widespread discussion in the media in recent years about the alleged perils of allowing workplace settlements to be subject to confidentiality.
While some argue that non-disclosure agreements (often also called “NDAs”) are inherently evil, others have noted the importance of having the tool of a confidential settlement agreement available in order to avoid what might otherwise be bruising and difficult litigation.
The province of British Columbia and its current government appears intent on doing something about the issue. The B.C. provincial legislature has recently seen the introduction of Bill M 215, which is legislation that has the stated purpose of restricting the use of NDAs relating to discrimination, harassment or allegations of discrimination and harassment.
The legislation, which was formally introduced by way of First Reading on March 9, 2023, is formally called the Non-Disclosure Agreements Act (the “Act”). If the Act becomes law, which is expected, then employers operating in B.C. will need to carefully consider their existing approach to dealing with allegations and findings of discrimination and harassment.
The basic concept of an NDA is that there is a written contractual requirement which prohibits the sharing of certain information. These types of agreements are widely used, including in a variety of commercial negotiations and transactions. Indeed, NDAs are often important for both sides when confidential information is exchanged, since there is often a need to protect legitimate business interests, including confidential financial information and trade secrets.
The use of NDAs in the context of workplace issues is much more contentious. Some activists and commentators have claimed (perhaps with justification) that NDAs are too often used to cover up wrongdoings by the powerful, resulting in a chilling effect on organization and preventing the filing of legitimate claims. One theme in this regard is that there is arguably a public interest associated with having a free and unfettered right to complain about harassment and abuse. Those who support the use of NDAs note the importance of being able to resolve sensitive, contested matters without publicity and the need to always proceed with a lengthy litigation and hearing process. Instead, when used with discretion, an NDA can allow all involved to move on from the dispute.
The Act would not impose a complete ban on the use of NDAs, and instead would impose certain requirements relating to their use. These rules would include a threshold requirement that the NDA must use “clear and understandable” language. In terms of substantive restrictions, the Act would mandate that all NDAs be agreed to voluntarily, without undue influence, and only after relevant persons have had the right to obtain independent legal advice. Further, the Act would require that all relevant NDAs both include a process for the waiver of confidentiality, and expire at a set and limited duration of time.
The Act also expressly prevents an NDA from limiting a person from proceeding with statutory complaints under the B.C. Employment Standards Act, Human Rights Code, Workers Compensation Act, or any other provincial (B.C.) or federal (Canada) statute. Further, the Act would void any provision in an NDA which would otherwise limit a person from obtaining professional advice, treatment or service, such as from a lawyer or medical practitioner. There is also a provision in the Act which would permit artist expression which does not identify the respondent in a case or the terms of the NDA.
Takeaways for Employers
The recent scandal involving Hockey Canada has included sustained and high profile criticism of the practice of using NDAs to settle litigation. The introduction of the Act in BC to address related concerns is part of an emerging trend in Canada and elsewhere, whereby NDAs will be very closely scrutinized, and possibly even unlawful. The concept that “a contract is a contract” will no longer prevail in a number a situations, especially when contentious harassment and discrimination allegations are settled on terms which are arguably unconscionable. For employers who receive, investigate and make findings with respect to workplace issues, the concept of a confidential outcome and “closure” is now under significant threat. This reinforces the importance of following a proper complaint and investigation process, and being prepared to defend those processes and related outcomes.