In April 2022, a woman filed a statement of claim against Hockey Canada alleging that she was sexually assaulted in 2018 by certain Canadian Hockey League players (some of whom were members of the 2018 World Junior Hockey team). She demanded in her statement of claim 3.5 million dollars in damages for the sexual assault. The alleged assault took place in London, Ontario, at or related to a social event hosted by Hockey Canada. Hockey Canada did not defend the action. Instead, Hockey Canada agreed to pay her the 3.5 million dollars she had demanded in her statement of claim. However, as part of the settlement, Hockey Canada had her agree to abide by a non-disclosure agreement. This means she would not be able to discuss the contents of the settlement or her allegations once she agreed to the settlement and was in receipt of the settlement funds.
Once the news broke of what took place, it caused a public uproar. There was outrage over how Hockey Canada settled and investigated the woman’s claims of sexual assault. Hockey Canada was subjected to public scrutiny over its actions. It has lost federal funding as well as monetary sponsorships.
So, what does this have to do with employment law?
At first, it may seem like the public outcry with respect to the Hockey Canada scandal has nothing to do with employment law. For instance, the individual complainant was not employed by Hockey Canada. The alleged assault did not occur during the course of employment. However, a lot of people were particularly critical of Hockey Canada for the fact that Hockey Canada had the complainant consent to a non-disclosure agreement as part of a settlement. And, in the employment context, non-disclosure agreements are routinely used in settlements between employers and employees and sometimes these settlements also involve allegations of sexual harassment or abuse. If an employer pays money to settle a dispute with an employee, they often want to keep the events leading to the settlement and the settlement amount private. Typically, any confidentiality provisions contained in the settlement agreement allows for disclosure of the terms of settlement only to the employee’s legal or financial advisors, family members or as required by law.
There have been criticisms of the use of non-disclosure agreements (NDAs) in employment law for a while, particularly when there have been allegations of workplace bullying or a toxic work environment or discrimination. In fact, at least one province in Canada went so far as to limit the use of NDAs in certain cases which was directed at employment law. For instance, P.E.I. brought new legislation in late 2021 that limits the use of NDAs in matters where discrimination or harassment, including sexual misconduct, have been alleged. In the case of the aforementioned legislation, NDAs and confidentiality provisions may only take part in a settlement if the individual who brought forward those allegations is amenable to allowing the NDA to be part of the settlement.
The criticism of the use of non-disclosure clauses in a settlement is that said clauses may allow individuals who were alleged to have bullied or harassed others to continue to do so. It can be also distasteful to think of victims of harassment or abuse to be silenced because of the NDA and disallowed from being able to tell their stories to others. This is because NDAs – also commonly called “confidentiality” clauses within the settlement agreement – exist to stop a party from communicating certain things about the settlement. They may be mutual (involving both parties to the dispute) or not. The NDA may be a simple single provision within the minutes of settlement or release or a complicated, stand-alone agreement between parties.
The consequences of breaching an NDA or confidentiality clause will be determined based on the wording of the provision or agreement. In our experience the confidentiality clause will often set out that the party breaching it will have to pay or return the settlement funds (either a portion or fully). Moreover, a party may also be sued for further damages depending on the nature of the statements made and the breach involved.
Firstly, we believe that any party should consult with a lawyer before agreeing to an NDA or confidentiality clause when settling a dispute. All parties to a settlement need to be aware of the scope of the NDA in that settlement and what the repercussions are, if any, to breaching the NDA.
Secondly, we believe what is missing from the recent public discussion about NDAs within settlement is the variation that we see on the ground when lawyers settle cases. Normally these provisions are relatively simple. However, they can infrequently be complex. They can be one-sided agreements, or they can be mutual and include both parties. They can include vague refrences to general conduct to be avoided or include specific statements or allegations. They are never usually an impediment to settlement – typically, they constitute at least one reason to settle. In most cases both sides just want to move on.
And that takes us to our third concern. Hockey Canada has brought these issues to the public in a case where the facts and allegations were egregious as they included serious allegations of a sexual assault. We can see a rush to impose certain legislation like that in P.E.I that would seem to limit the use of NDAs to instances where it is the wish of the party claiming harassment or discrimination. However, this is pretty much already the case. One side cannot make the other side commit to a settlement. And, if an NDA is not on the table for settlement at all, it may have a chilling effect on settlement on the part of an employer because they might as well duke it out in court especially in cases of harassment or discrimination that do not involve sexual assault. Indeed, the person contemplating taking the deal does not have to do so – as plaintiff, you always have the right to reject a settlement and to try your matter in court.