A culture of silence? – the use of NDAs in workplace sexual harassment claims

Non-disclosure agreements, better known as ‘NDAs’, have long been an accepted practice for settling workplace sexual harassment complaints out of court. While NDAs are an American concept, the practice of binding parties to keep the matter under wraps, achieved through the inclusion of confidentiality and non-disparagement terms in a settlement agreement, is common in Australia.

In complaints of workplace sexual harassment, NDAs are used to keep the details of a settlement arrangement confidential, such as the settlement amount. However, importantly, this often includes keeping the alleged harassing behaviour confidential too.

The ‘Let’s talk about confidentiality’ report led by practitioners at the Human Rights Law Centre and Redfern Legal Centre investigated the use of NDAs in sexual harassment settlements since the release of the Respect@Work report in March 2020. This data revealed that from a survey of 145 sexual harassment legal practitioners across Australia, approximately 75% of the profession had never settled a sexual harassment complaint without a rigorous NDA.

NDAs are not a legally essential term for a settlement – they are optional, can be negotiated, and must be agreed upon by all parties to the settlement. So why are strict NDAs used so commonly?

NDA usage in Australia since Respect@Work

The Respect@Work report investigated the prevalence of workplace sexual harassment in Australia and produced 55 recommendations to the Federal Government to address this endemic issue. Relevantly, the report cautioned that the use of NDAs could “contribute to a culture of silence” and recommendation 38 specifically addressed this:

Recommendation 38: The Commission, in conjunction with the Workplace Sexual Harassment Council, develop 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.

The ‘Guidelines on the Use of Confidentiality Clauses in the Resolution of Workplace Sexual Harassment Complaints’ were published in 2022. At a high level, these guidelines recommend considering the need for confidentiality on a case-by-case basis without risking the organisation’s ability to respond to systemic issues, and protecting the person who made the allegation with necessary support and trauma-informed, culturally sensitive, and intersectional negotiations.

Despite the guidelines encouraging a nuanced, considered approach to the use of NDAs, the ‘Let’s talk about confidentiality’ report suggests strict NDAs remain the default settlement term for workplace sexual harassment claims and there are enduring views that settlement is impossible, or at least, improbable, without a strict NDA. The report also reveals that as many as one-third of applicant lawyers do not even provide advice to their applicant clients on whether settlements can be achieved without the use of NDAs. There may still be a view contributing to the use of NDAs that sexual harassment is only perpetrated by ‘bad apples’ in workplaces and that it does not signify a more pervasive cultural problem.

However, there are some signs this practice is evolving. According to the report, one-third of applicant lawyers and one-fifth of respondent lawyers have resolved matters with adjusted NDAs. This suggests there is scope for nuanced and varied NDA clauses to be applied successfully.

Views on NDAs broadly

There are different perspectives on the use of NDAs between victim-survivor advocates, employers, and lawyers.

The major concern among victim-survivor advocates is the use of strict NDAs to “contract” victims into silence. This raises serious issues for the health and wellbeing of victims, who may be unable to speak about their experiences with necessary support services, such as medical professionals, counsellors, and even family. Conversely, there are instances where victims may prefer confidentiality as a means for privacy and closure, with some carve-outs for making disclosures to specific people or support services.

For employers, NDAs can offer protection from reputational damage and protect against the misuse of information relating to unconfirmed or unsubstantiated claims. Conversely, strict NDAs can conceal and preserve systemic cultural problems in the workplace, including by assisting to maintain the employment of perpetrators of sexual harassment and preventing transparency of workplace communications. One can readily see the potential for harassers to more easily move to new employment, with their past behaviour concealed by confidentiality terms. 

It's important to recognise the diversity of views on this issue. Some legal practitioners and others closely involved in the area consider that confidentiality can and should be valued in a negotiation such that it can increase the bargaining power of individuals in settlement negotiations, especially if an NDA is more important to one party than another. However, others consider this an ethically questionable tactic, and that confidentiality should not be used as a bargaining tool.

What is clear across the spectrum of opinions is that NDAs have the potential to become a barrier to the efficient settlement of issues if they are treated as standard and non-negotiable terms. This can lead to lengthy negotiations that retraumatise victims in the process.

The crossover between NDAs and defamation

The report also exposed the practice of accused perpetrators sending defamation concerns notices to those who have made an allegation of sexual harassment to their employer. This shows the potential for defamation concerns notices to be used to effectively silence victims from speaking out even while they are still in the process of making internal complaints. This is because responding to a concerns notice involves making an ‘Offer of Amends’ – a written agreement to “make amends” to avoid the matter going to court. This can include compensation, an apology, and/or a promise of confidentiality over the defamatory accusations. These strategies have the potential to compel a victim to silence.

Having said this, it remains important to note that without confidentiality provisions in a settlement agreement, individuals may be at risk of making defamatory statements (including unknowingly). Part of managing the risk of a defamation claim may involve implementing appropriate confidentiality provisions in settlements.

International Models

There are different models emerging internationally to regulate the use of NDAs. At a high-level, some of the recurring themes across various rules or practices internationally include:

• offering the victim independent legal advice at the employer’s expense;
• banning efforts to pressure the victim to include a confidentiality clause;
• ensuring the settlement does not adversely affect the health or safety of an uninvolved third party or the public interest;
• including a provision for the victim to waive confidentiality in the future if they choose; and
• limiting the duration of the agreement.

The below table provides a summary of key international developments.

Practical Considerations

The positive duty on employers to prevent workplace sexual harassment in section 47C of the Sex Discrimination Act 1984 (Cth) means that employers must act proactively to stop instances of sexual harassment, not just react after incidents occur. Part of this duty is about addressing systemic issues that enable an environment where sexual harassment can occur.  Organisations need to think deeply about balancing the use of confidentiality terms with the need to examine what the sexual harassment says about the company and the state of its compliance with the positive duty. 

Importantly, organisations should consult and engage stakeholders to align their policies with actual practice. This will prevent businesses from promising strict confidentiality when its own policies do not reflect the same, and ensure representatives from within the business fully understand what the organisation is seeking to achieve - including as part of the resolution of a claim.  In particular, organisations should:

• consider having a variety of possible NDA clauses to suit the circumstances;
• consider whether the person who has made an allegation has requested an NDA;
• ensure confidentiality terms are raised early on in any resolution process. They should not be regarded as boilerplate provisions included in settlement deeds as a matter of course. Adopting this approach runs the risk of an agreed resolution falling over; and
• reflect on the organisation’s short and long term interests, objectives and obligations and consider whether an NDA may meet the short-term interests and objectives at the expense of overriding the organisation’s duties and obligations and long-term goals – including the development of a respectful workplace culture.

There is no homogenous view on the use of NDAs in settling workplace sexual harassment claims, and certainly no one-size-fits-all solution to meeting the varying interests of parties in such matters. NDAs can be moulded to the facts of a case, but the current prevailing trend of using strict NDAs as standard practice is problematic and has the potential to run counter to an employer’s positive duty to prevent workplace sexual harassment.