Use of non-disclosure agreements at Network Seven puts spotlight on downsides for employees – and employers
Bullying and sexual harassment are a curse on corporate culture. But non-disclosure agreements (NDAs) drafted after the event can wreck a survivor’s chances of recovery — and also leave an employer worse off, says employment lawyer Amanda Watt.
Rather than sexual harassment being prevented, the gagging effect of an NDA can see a perpetrator carry on their behaviour as though the rules don’t apply to them, said Watt, a partner at MinterEllison in Melbourne.
The secrecy around NDAs also works against organisations if only a very small group of people are aware of them. When bad behaviour continues at a firm, its compounded effects can create a timebomb that could destroy it, she said.
Financial incentives of NDAs
The culture of bullying and sexism alleged to have prevailed at Network Seven, as investigated by the ABC in an episode of Four Corners in August, is a typical scenario of how NDAs can be used.
NDAs traditionally involve an organisation paying off a complainant in an employment law dispute in exchange for their silence and a release of liability, Watt said.
The employee may be limited in talking about the episode to their lawyer or accountant, for example, or as required by law to produce information.
“In a traditional NDA, the confidentiality clause usually removed, for the person subjected to the behaviour, their agency to speak about what happened to them, even to close colleagues, family and health practitioners,” Watt said.
Such constraints are a severe impediment to a person’s emotional recovery, and work by the Human Rights Commission has shown NDAs can have a very negative impact on well-being.
There is also the matter of finding another job. In that case, an NDA will mean the person can enter the job market without being connected with scandal, which is a positive.
“Most people don’t want to become front-page news,” Watt said. “Many agreed to confidentiality to protect their privacy because they were worried about the impact on their career. Because they had made a complaint or raised concerns, they didn’t trust that their career wouldn’t suffer for that.”
Impact on organisations
Traditional NDAs can leave the rot in a company untreated, she said, if bad behaviour is kept secret within a select group. “How [NDAs] are used and managed can impact on whether unlawful behaviour continues or not in the workplace.”
Because traditional NDAs tended to be held very tightly by a very small number of people in an organisation, those organisations often lost the ability to see systemic trends of certain people engaging in these behaviours over time.
“They lost the ability to keep their people safe,” Watt said.
“These old-fashioned NDAs created a perception that behaviour was being driven underground, that hush money was being paid, and that’s become detrimental to organisations’ reputation.”
The introduction of positive duty on employers to prevent workplace sexual harassment, part of the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act passed in late 2022, has turned a searchlight on the dark corners of corporate Australia.
In December 2022, the Australian Human Rights Commission issued guidelines to organisations about how it believes NDAs and confidentiality clauses should be approached. Its recommendations included that an NDA should contain information on access to support and counselling.
The guidelines were a positive development, Watt said.
“Just having a confidentiality agreement confined to a settlement sum is not driving these poor outcomes; it’s the inability of someone to be able to share their story if they want to and for the organisation to understand and share its learnings in a de-identified way.”
Follow guidelines of human rights commission
Organisations can use NDAs if they choose, but they should pay attention to the guidelines of the Australian Human Rights Commission, Watt said.
“People are often very vulnerable when reporting sexual harassment and this needs to be taken into account when they are considering making an NDA,” she said. “The best practice around this, if someone freely wants to do it, is to provide them access to independent advice and a cooling-off period.”
Watt suggested a strategy where a carveout in an NDA would enable an organisation to be able to fulfill its duty to keep the affected person and other people safe.
“Organisations need to be able to say [in relation to sexual harassment], ‘We’re owning this and this is what we are doing about it,’” she said. “That’s really important, so that people trust they can raise concerns so that these behaviours can be prevented.”
A confidentiality clause that lasts in perpetuity is only sweeping problems under the carpet.
“It’s important an organisation doesn’t prevent a person from telling their story if and when they ever choose to do so, and certainly they should never be precluded from being able to tell their close family or their health practitioners – because they need to be able to recover from what’s happened to them,” Watt said.
Right to privacy with NDAs
A request for an NDA is often initiated by people subjected to the behaviour because they wish to protect their privacy and livelihoods, Watt said.
“But again, it all depends on how you negotiate it and what you put in it is the key.”
Carveouts can be included within NDAs without naming a person or identifying them to a broader audience, if that is their wish. Such inclusions can build trust and make it clear to the people engaging in bad behaviour that they will be accountable, Watt said.
“Some organizations have done that,” she said. “There has been a shift to greater transparency generally, because they understand that hiding these things doesn’t help them anymore.”
