Nondisclosure agreements revisited in the wake of #MeToo

Private settlement agreements in wrongful dismissal claims typically require that the claimant agree to maintain strict confidentiality regarding settlement terms. However, in contentious wrongful dismissal litigation, some employers seek to impose broad nondisclosure terms that extend well beyond the terms of settlement, but in fact, seek to silence the claimant from revealing or discussing embarrassing facts or allegations underlying the legal claim. Until recently, such confidentiality restrictions have not been highly contentious or controversial. While confidentiality is difficult to monitor on a practical level, the consequences of breaching confidentiality can be significant. Violations of confidentiality provisions have resulted in severe financial penalties, including forfeiture or repayment of all or part of the settlement proceeds. In the seminal case of Wong v. The Globe and Mail Inc. 2014 ONSC 6372, Jan Wong, a former journalist of the Globe and Mail, received a sizable lump sum payment to settle various labour grievances with the newspaper. The settlement agreement contained a confidentiality clause requiring Wong to maintain strict confidentiality with respect to terms of settlement. The clause specifically contemplated repayment of the settlement proceeds in the event of breach.

Following settlement, Wong published a book in which she reported that the newspaper paid her a “pile of money” to go away and with a “big fat check” from the newspaper, she now had “a vastly swollen bank account.”

While Wong did not elaborate on the exact dollar amounts she received, she said enough to cross the line and it was determined that she breached terms of settlement. She was ordered to repay the sum of money she received (almost $210,000). On judicial review, the court sided with the Globe and Mail, ultimately finding that the repayment of the money was a reasonable enforcement provision. Of significance to the court’s reasoning, Wong’s silence was the main thing the newspaper was paying for and did not get.

The Ontario Court of Appeal in Peachtree II Associates — Dallas, L.P. v. 857486 Ontario Ltd. [2005] O.J. No. 2749 rejected the notion that penalty or forfeiture clauses should not be enforced as a general rule, in favour of the principle that parties ought to be able to define for themselves the consequences of breach. Generally, there must be compelling reasons to sway a court to depart from the general principle that parties should be held to their settlements (Remedy Drug Store v. Farnham 2015 ONCA 576 at para. 66). Pursuant to s. 98 of the Ontario Courts of Justice Act, the court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just. The courts in Ontario have recognized narrow circumstances in which a forfeiture clause may be unenforceable, for example, if the sum of money being forfeited is out of all proportion to the damage and it must be unconscionable for the party to retain the money (para. 46 of Wong).

In the context of the #MeToo movement, there has been a great deal of public scrutiny regarding the appropriateness of confidentiality restrictions aimed to prevent claimants from sharing or discussing the underlying events giving rise to their legal claim. Victim advocates argue that such a broad nondisclosure restriction enabled repeat offenders to silence victims of sexual harassment. While employers have a duty to maintain a workplace free of sexual harassment, silencing claimants has in some cases fostered a workplace environment in which other employees may be unwittingly exposed to similar harassment issues. Harvey Weinstein reportedly entered into several secretive agreements over decades, which prohibited claimants from speaking out about their allegations without facing significant financial penalty. McKayla Maroney, Olympic gymnast, recently filed a legal claim against USA Gymnastics and related parties, claiming that her confidential settlement was used to cover up alleged abuse by former national team doctor Larry Nassar.

The #MeToo movement has resulted in a review of nondisclosure agreements and their role in contributing to the pervasiveness of sexual harassment in the workplace. South of the border, as the Silence Breakers were named as Time magazine’s Person of the Year, several U.S. lawmakers at the state level proposed legislation to ban confidentiality provisions in workplace sexual harassment settlements that would prevent a claimant from speaking out about the underlying facts giving rise to the claim or action, unless confidentiality was requested by the claimant. Such a move is not without controversy as some advocates argue that a ban on confidentiality may have the unintended consequence of deterring private settlements as silence is often the key term that employers are willing to pay for.

It remains to be seen how the #MeToo movement will influence the jurisprudence in this area, if at all. There are no similar legislative efforts in Canada at this time. However, the changing public policy discussion should give counsel cause to reconsider the scope and enforceability of confidentiality provisions in sexual harassment claims. Restrictions that prevent a claimant from discussing the circumstances giving rise to their claim may be open for attack. The public policy objective in favour of allowing victims of sexual harassment to speak out and prevent a recurrence may be a compelling reason to depart from the general principle that the claimant should be held to broad nondisclosure terms and hefty financial penalties, merely because the agreement says so.

“Previously published by The Lawyer’s Daily (www.thelawyersdaily.ca) a division of LexisNexis Canada”

By |2020-09-03T03:57:39-04:00September 15th, 2019|Article-All|0 Comments

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