By Howard Levitt
Abolishing NDAs would prevent victims from receiving appropriate compensation and exacerbate the original offence
It is something I can speak to from daily experience.
I am not talking about those NDAs which have become de rigueur in virtually every standard form release agreement signed, where neither party actually puts its mind to the NDA clause, where the employee has no salient story to tell anyway and where the employer is realistically indifferent to whether the employee discusses their experience with others or not. Those represent the vast majority of NDAs now signed and, if the employer was ever asked to remove it from an agreement, they would be satisfied with a non-disparagement clause instead (another clause which has become part of all standard form release agreements).
Instead, I am discussing those situations where NDAs are a fundamental part of the bargain because the settlement is made primarily for the purpose of buying silence. And those are the very clauses which the anti-NDA crowd is targeting because they want, usually women, to be able to share their horrible experiences with the world.
But consider the position of the victims. The employer wants an NDA because its behaviour, or that of one of its executives, is brand damaging and they do not want the world to read about it in this column or elsewhere in the press. Perhaps there was sexual harassment or financial misconduct, or some lesser peccadillo that would still be highly problematic or embarrassing if publicized. This conduct might arise from a dismissal, might be conduct creating a constructive dismissal or perhaps simply relevant in some way to the case and the employer wishes to buy that employee’s silence.
About 95 per cent of such cases settle for dramatically more than the legal case is worth. With a properly drafted NDA, in return for paying money, that company or its executive escapes public censure, morale issues with other employees, difficulty in recruiting new ones and potentially can avoid a scandal that might cause advertisers, customers or suppliers to refuse to continue to do business with it. What is it worth to that company for such information to be kept out of the public eye?
The lawsuit itself is generally worth comparatively little. Sexual harassment itself is generally awarded $10,000 to $25,000 in human rights damages and the dismissal a number of months’ severance, which, for the average Canadian, is less than $100,000. Will that genuinely compensate the woman in question (if it is a woman) for the emotional trauma and potentially damaged career? If all of that can be proved, it might be worth another $50,000 or so. Is that sufficient compensation? Even in the extreme case of rape, a payout might not exceed $150,000, unless an inability to work again can be proven.
By contrast, in return for an NDA, a company might, and often is, prepared to pay hundreds of thousands of dollars or, in the right cases, north, sometimes considerably so, of one million dollars for silence. After all, the publicity from the case could be much more damaging to the employer’s brand than that, even in the hundreds of millions and beyond. Although not in that stratosphere, look at the brand damage the Lisa Laflamme affair has caused Bell Media.
The proof (of whether victims support the abolition of NDAs) is, as they say, in the pudding. When clients who have signed NDAs have asked me about going public with their plight and I pointed out that they would have to repay the hundreds of thousands of dollars negotiated, without an exception they recoiled instantly from the thought.
Who then will be the victims of the left’s new cause du jour?
The arguments raised against NDAs include that, without them, predators will be free to ravage again with impunity. That harkens back to a bygone era. In our era of corporate governance, the outcome is different and I see it all the time. Usually, codes of conduct prohibit inappropriate actions and the perpetrators are quickly dispatched as part of the employer’s crisis management. But when that (rarely) does not occur, two things happen. First, the perpetrator is put on a final warning and the conduct becomes very unlikely to recur. Second, if it does and appropriate protections are not put into place for potential future victims, the enablers — such as potentially the general counsel or vice-president of human resources — who do not put in place those protections or warn future potential victims of their risks are potentially liable in negligence to the new victim. That has its own prophylactic impact.
Another argument raised is that they cannot discuss their experience with a therapist. But such an exception can and is negotiated as long as the therapist has the same confidentiality obligation, which they will.
The final argument raised against NDAs by the credulous left is that individuals are “coerced” to sign them. That same argument can be made, of course, respecting any employee signing any severance agreement: no signature, no payment of the negotiated amount.
But with NDAs, the real pressure — although I would not rashly call it coercion — is not on the employee, but on the company, which is invariably the party most desperate to put the situation quietly behind it by paying significant compensation to have it buried, encased in concrete, deep beneath the ocean. Only then can they take a deep breath of relief — and the victim be truly compensated.