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Out in the open: Shifting the culture of silence in the use of non-disclosure agreements

  • Market Insight 21 December 2022 21 December 2022
  • Asia Pacific

  • Professional Practices

On 30 November 2022, Australia’s Sex Discrimination Commissioner Kate Jenkins announced that the Respect@Work Council is set to release federal guidelines recommending the limited use of confidentiality clauses in sexual harassment settlement agreements, also called non-disclosure agreements (NDAs), for Australian employers.

“So much is out in the open now in so many of our workplaces. There can be no turning back.” – Kate Jenkins, Australia’s Sex Discrimination Commissioner.[1]

On 30 November 2022, Australia’s Sex Discrimination Commissioner Kate Jenkins announced that the Respect@Work Council is set to release federal guidelines recommending the limited use of confidentiality clauses in sexual harassment settlement agreements, also called non-disclosure agreements (NDAs), for Australian employers.[2]

NDAs, confidentiality agreements or settlement agreements that include confidentiality clauses, can be used by organisations to resolve workplace sexual harassment matters as an alternative to a litigated process and can often provide a number of benefits to both complainants and employers as noted in the Respect@Work Report.[i] . NDAs currently operate under Australian contract law with little legislative regulation.[3]In its 2020 Respect@Work report (the Report) the Australian Human Rights Commission (the Commission) urged for better guidance on the use of NDAs in workplace sexual harassment matters due to the significant risk of these agreements being misused to silence victims, enable harassers to escape appropriate penalty and perpetuate power imbalances that disadvantage complainants.[4]

Recommendation 38 of the Report recommended the development of a “practice note or guideline that identifies best practice principles for the use of NDAs in workplace sexual harassment matters to inform the development of regulation on NDAs.”[5]

While there is currently limited guidance on  the use of NDAs in sexual harassment matters, insights into what recommendations could likely be made can be gathered from other jurisdictions.

Guidance gleaned  from the UK and the USA

In 2019, the UK House of Commons Women and Equalities Committee (WEC) released a report on the use of NDAs in discrimination or harassment cases. In response, the UK government committed to legislate the following:

  • No confidentiality provision in an employment contract or settlement agreement can prevent an employee from making a disclosure to the police, regulated health and care professionals or legal professionals.
     
  • Confidentiality clauses in settlement agreements must clearly set out their limitations and these limitations must be included as part of the mandatory written statement of employment particulars.
     
  • The language in confidentiality clauses must be clear and specific, in ‘plain English’ explanations.
     
  • Mandatory independent legal advice must be received by employees.[6]

Recent legislative reforms in the United States have also addressed similar concerns. A key example is New York State’s reforms that permit confidentiality clauses only at the request of the victim.[7]

What is happening in Australia?

Victoria

In a country first, the Victorian Government has accepted in principle, the recommendation made by the Ministerial Taskforce on Workplace Sexual Harassment (the Taskforce), restricting the use of a NDAs in workplace sexual harassment matters.[8] 

The Taskforce recommended that when considering and drafting legislation, the Victorian Government should use Ireland’s Employment Equality (Amendment) (Non-Disclosure Agreements) Bill 2021 (the EE Bill) as the model for reform.[9]

If enacted, the EE Bill will prohibit employers from entering into NDAs in situations where an employee has experienced or alleges sexual harassment, except at the employee’s request. An NDA will not apply in relation to communications between the employee and specified persons (including medical professionals, mental health professionals and the employee's friends and family). Further, such an NDA will only be enforceable if certain criteria are met, including that:

  • the employer has offered the employee independent written legal advice provided at the employer's expense;
     
  • the NDA does not adversely affect the future health or safety of a third party or the public interest; and
     
  • the NDA includes an opportunity for the relevant employee to decide to waive their own confidentiality in the future.

The EE Bill provides that an employer entering into an NDA that does not cooperate with the above criteria will be guilty of an offence, and the NDA will be null and void.

The Taskforce recommended that the Victorian legislation draw from the EE Bill.  Accepting this recommendation in principle, the Victorian government noted the complexity of NDAs and the significant work required before any legislative amendments are made.  If passed, the legislation will mark a dramatic a shift away from the culture of silence in Australia.

We may see other States follow suit and choosing to effectively nationalise restrictions on the use of NDAs or confidentiality clauses in sexual harassment cases, particularly given the often detrimental impact and long-term effects they can have on victims of sexual harassment.

Company led change: Telstra

Notwithstanding legislative change, change may be coming from employers themselves with some employers proactively taking matters into their own hands. A good recent example comes from Telstra, where it was recently announced that they will no longer ask employees affected by sexual harassment in the workplace to sign confidentiality agreements. While it appears this does not necessarily mean Telstra will be entirely prohibiting the use of NDAs altogether, it does appear the onus would be placed on the complainants to initiate the request to enter into an NDA.

Alex Badenoch, Telstra’s Group Executive of Transformation, Communications and People, said that ditching confidentiality agreements - unless it is something the employee requests – “will shine light in the issue, send a strong message that sexual harassment is not tolerated, and be able to share anonymous learning that could prevent future incidents.”[10]

What are the recommendations in the impending guidelines likely to be?

It is significant that Commissioner Jenkins has advised against a blanket ban on confidentiality clauses or NDAs in their entirety, noting that these agreements can be beneficial for some complainants by protecting their privacy and helping to provide closure to them.[11] Rather the approach put forward by the Commissioner is that agreements with confidentiality clauses should not be the “standard” and instead there should be “nuance around what is kept confidential” in these agreements.[12]

On this basis, we anticipate the impending  guidelines may focus on including:

  • a model confidentiality clause that expands the carve outs we typically see to allow the employee to disclose details of their complaint or harassment to police, for the purpose of  seeking professional assistance such as legal advice and/or support from a registered health practitioner, or potentially providing the employee with the ability to waive their own confidentiality as in the EE Bill;
     
  • the requirement for an information sheet to be issued to the employee to assist them to understand what can and cannot be disclosed and to whom;
     
  • the requirement to ensure that an employee receives mandatory legal advice prior to entering into an NDA;
  • that any confidentiality clause must be drafted in plain English and clearly explains each party’s rights and what information can and cannot be disclosed; and
     
  • guidelines to ensure the use of the NDA does not adversely affect the health and safety of other workers, visitors, customers, clients, suppliers or others in the workplace.

Considering the recent announcement by Commissioner Jenkins and the bold move by Victoria, it is prudent that all Australian employers consider the approach their organisation takes in seeking to enter into NDAs in sexual harassment matters and how they are best served in protecting their business, while at the same time ensuring that their actions do not have adverse psychological consequences for those victims of sexual harassment. Please get in touch if you would like more information about how we can assist your organisation in the use of NDAs or confidentiality agreements.


[1] Kate Jenkins, Australia’s Sex Discrimination Commissioner, ‘National Press Club Address: Changing Laws, Changing Behaviours, Changing Lives’ (Speech, The National Press Club of Australia, 30 November 2022).

[3] Ibid.

[4] Ibid.

[5] Ibid.

[9] Employment Equality (Amendment) (Non-Disclosure Agreements) Bill 2021 (SR).

[11] Above n 1.

[12] Ibid.  


[i] Above n 2 at 557.

End

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