'Any confidentiality agreement doesn't preclude an employer from looking into what caused the issue,' says Shaun Brookes of Buddle Findlay
Non-disclosure agreements (NDAs) are under the spotlight, with Health New Zealand commissioner Lester Levy making it clear during a parliamentary select committee earlier this month that he sees no value in them.
“I do not request anyone to sign an NDA and I don’t intend to,” he told The New Zealand Herald after the session concluded.
The committee had heard that 67 staff at Health NZ have signed NDAs, with Health NZ chief executive Margie Apa backing the agreements for providing “added protection for confidentiality”, she told Radio New Zealand.
NDAs that include confidentiality and non-disparagement clauses are quite common in employment settlements – but do they still make sense?
Breach of non-disclosure agreement clauses
NDAs are used quite extensively in New Zealand, said Buddle Findlay special counsel Shaun Brookes, where they can be part of a record of settlement when resolving a dispute at the end of a mediation, or independently of a mediation.
“It’s very common for there to be a confidentiality clause, and also a non-disparagement clause,” he told HRD. “Particularly where the relationship has come to an end, where the employee has been terminated or otherwise resigned.”
NDAs can be pored over in situations where one side alleges a breach of non-disparagement or confidentiality clauses. The Employment Relations Authority has exclusive jurisdiction to hear cases and issue compliance orders or penalties.
Although NDAs restrict what parties can divulge about each other, Brookes said they are seldom secretive to the extent that they stunt an organisation’s ability to question its own culture and practices.
“Any confidentiality agreement doesn’t preclude an employer from looking into what caused the issue in the first place,” he said.
“For example, if an employee feels they were harassed, and a settlement agreement is entered into as a result of that, and the employee leaves, it is still open to the employer to investigate the conduct or the culture of the organisation – it just wouldn’t be able to breach that particular agreement.”
NDAs and disciplinary action
It would be unlikely for an organisation to enter an NDA that precludes it from taking disciplinary action against someone who might have been guilty of wrongdoing within the organisation, he said.
Under the Health and Safety at Work Act, an employer is obliged to address any risks to its employees.
“If bullying, for example, seems rife in the organisation, they can’t just turn a blind eye to that because they’ve entered into a confidentiality agreement with one person,” Brookes said. “They can’t just sweep it under the carpet by entering into an agreement with them.”
An NDA is an agreement. Parties are not forced into them, he said.
“They go in with their eyes open, generally with legal advice about the terms of the agreement and what that means.”
Confidentiality and non-disparagement clauses
A non-disparagement clause within an NDA should be flexible enough to avoid trivial claims, he said.
“A non-disparagement clause would be limited to the people who are aware of the agreement.”
Confidentiality and non-disparagement clauses are not an opportunity for an organisation to dodge its obligation to report serious misconduct, sometimes to parliament or to the Auditor General, he said.
“Often, we’ll see cases involving teachers where there might be an investigation around conduct. The teacher might resign before the investigation concludes or they might be terminated, and there’s a dispute about whether that was a lawful termination,” Brookes said.
“The school, from a reputational point of view, and the teacher, from their own personal and reputational point of view, have an interest in a non-disparagement and a confidentiality clause, but the school is going to have a reporting obligation to the Teaching Council. Regardless of what they agree to in the contract, they can’t contract out of those statutory obligations.”
If the perpetrator of misdeeds is the one leaving an organisation, an NDA will make it harder for future employers to pick up warning signs. “Future employers have very little ability to look beyond that [NDA],” Brookes said.
HR managers will be canny enough to detect when a referee company is being coy. If they only supply the briefest of statements about a former employee – that they were employed from this date to that date – it could mean they left under a cloud, he said.
Tips for drafting an NDA
Brookes has advice for those considering an NDA:
- Be very specific about when the confidentiality and non-disparagement clauses will apply and when they won’t apply.
- Be clear about circumstances in which the law does require disclosure of some information.
- Consider inclusion in the confidentiality clause the ability for the signing party to discuss the matter when obtaining professional advice or support, which may include a lawyer, accountant or for medical support, including counselling.
“Before you draft these agreements, it’s worth turning your mind to their scope and when they want to apply, and making sure it’s just as far as you actually need it rather than something that may become more problematic than it’s worth,” he said.
Although Brookes said he doesn’t see NDAs being abused very often by employers, former employees have been known to breach non-disparagement clauses.
“There’s quite a bit of case law on this, particularly where the employee goes to on social media,” he said. “If they are bagging their ex-employer to friends or family, that’s unlikely to get back to the employer, but when negative comments are published on social media, that’s when it’s more likely to be litigated.”