Nov 7

Nov 7 Post-#MeToo: Confidentiality Restrictions May Go the Way of the Dodo

The explosion of the #MeToo movement happened just over two years ago[i], and Harvey Weinstein is arguably the most prolific person to be called out (and taken down) in its wake. Recently, Jodi Kantor and Megan Twohey released their book, She Said, about their reporting on #MeToo and Weinstein. The journalists also write more broadly about settlements between survivors and perpetrators of sexual assault and harassment. Kantor and Twohey highlighted the prevalence and rigidity of confidentiality restrictions in harassment settlements and criticized the role of lawyers in using such restrictions.

Amy Kaufman at the Los Angeles Times wrote a recent article in which she explored the old-school approach to confidentiality in settlements and the reluctance to rethink the “confidentiality default.” The friction arising from this rethinking was apparent in a quote in the article from Gloria Allred, an advocate for #MeToo survivors, and the response by Kantor and Twohey:

Allred: “Reporters want to know everything, because that’s their job. I don’t criticize them, because that’s their job. But my job is not to be a member of the press. My job is to put my client first.”
Kantor and Twohey: “[W]hile [confidential settlements] can provide victims of sexual abuse with financial recompense and privacy, they also allow alleged predators to repeatedly cover their tracks and go on to reportedly hurt others…We are watching closely as legislators in California and elsewhere pursue alternative ways for victims to receive financial recompense that don’t enable predation.”

Kantor and Twohey are referring to recent calls to ban NDAs. From a legal perspective, confidentiality is a standard term tied to settlements in the workplace. But are NDAs soon to become extinct and if so, what should employers do?

What is an NDA?

An NDA is a non-disclosure agreement. It is a restriction on a person’s ability to share, post or use certain information or documents. The subject matter of an NDA is usually set out in writing, but there are some implicit, common law restrictions on disclosing another individual’s or entity’s confidential or proprietary information and documents.[ii]

Are NDAs absolute?

There are some universal exceptions to the enforcement of an NDA – i.e. a person can disclose information to their legal counsel and as required by law, such as when they are compelled to testify. Other matter-specific exceptions can be stipulated in writing.

When are NDAs used?

NDAs are common restrictions. Aside from settlement agreements in #MeToo-related claims, they are included in employment offers; supply agreements between businesses; and termination documents.

Why do lawyers use NDAs in settlement agreements?

I’ll admit it – I include confidentiality restrictions in nearly every first draft of a settlement agreement and remove or amend it to fit the circumstances. In the employment context, lawyers include NDAs because their employer clients are paying money to disgruntled employees and the lawyers want to get their employer clients something in return.

Essentially, employers are “buying” a degree of certainty by making a settlement conditional on confidentiality, including certainty that their brand will not be tarnished; it will avoid the time and costs associated with going to court; and there will not be a flood of other employees making similar claims.

What does a written NDA cover?

A written NDA will cover what the parties say it covers. The NDA may identify specific details and documents or broader categories of information and documents that cannot be disclosed. For example:

proprietary information
allegations of harassment, bullying, or discrimination (if raised by the employee)
settlement terms (and sometimes even the fact that a settlement was reached)

In the case of #MeToo, an NDA may restrict a complainant’s ability to discuss the allegations of harassment or assault; the fact that an investigation occurred; the findings of the investigation; and any subsequent action taken by the employer, the employee and the perpetrator.

Are NDAs enforceable?

If drafted properly, an NDA is enforceable…for now. If one party discloses information improperly, the other party can claim the agreement has been breached and sue for damages or treat the agreement as being “undone.”

However, many NDAs are not drafted properly. I review proposed confidentiality clauses from other lawyers and parties often, including in #MeToo cases, and some are clumsily worded and:

restrict disclosure only about the fact that a settlement has occurred, but not the about allegations underlying the actual dispute;
apply to allegations against the company, but not its employees or former employees;
do not provide for reasonable exceptions, including the universal exceptions (seeking legal advice and as compelled by law), but also in other regulatory investigations; when seeking medical or therapeutic treatment; while speaking with immediate family (or a friend or support person if there is no family), etc.;
fail to bind those who receive disclosure under an exception; and
place unreasonable burdens on employees who may be asked direct questions about the allegations and fail to provide for a script or agreed statement of facts that all parties approve.

If an NDA is enforceable now, will it be enforceable forever?

Likely not. The #MeToo movement has led to a monumental cultural shift about the way we respond to and recover from predatory behaviour, including in the workplace. Legislative proposals in California and elsewhere demonstrate a trend towards prohibiting NDAs. Employers like NBC and organizations like USA Gymnastics have retroactively “released” survivors from NDAs in part because of public backlash. But I suspect that they also recognize that courts will likely find such restrictions to be unconscionable and therefore unenforceable.

PH Balance Points

If NDAs are likely going the way of the dodo, then what’s an employer to do? Employers can (and should) still use NDAs, but with more care than they have used in the past. I recommend the following approach:

Don’t use a hammer to crack a nut…or settle a case: Not every settlement requires an NDA. Consider limiting confidentiality only to proprietary information and the findings of the investigation, but not about the allegations themselves.
Flip the script: Instead of focusing on what a former employer cannot say, confirm what they can say. An agreed statement of facts and joint press releases are becoming more common and reflect a degree of respect and good faith that is missing in an NDA.
Get creative and clear with your boilerplate clauses: Any restrictions should be detailed and clear. Don’t use a broad restriction that you pulled from another agreement. Tailor the restriction to the situation and consider what value you are (and are not) getting from an NDA.
Prepare as though the NDA won’t be enforceable: It would be naïve to ignore the change in our culture and legislation post-#MeToo. Assume the worst – i.e. that your past and future NDAs may eventually become unenforceable – and have a back-up plan to address what happens if allegations become public.
Make sure the NDA is signed: Speak with David Dennison and Peggy Peterson for more details.