Manitoba Law Reform Commission Report on Non-Disclosure Agreements in Misconduct Settlements

The Manitoba Law Reform Commission has published a report on the use of Non-Disclosure Agreements in the Settlement of Misconduct Claims.

A non-disclosure agreement (NDA) is a contract which restrains parties from disclosing certain information. Several high profile situations in recent years have shone light on concerns with respect to NDAs used to settle misconduct claims. This includes the harm which can be perpetuated when NDAs are used to silence victims of misconduct, particularly sexual misconduct, in exchange for money.

Proponents of NDA legislation voiced concerns over their use to shut up complainants and potentially perpetuate wrongdoing. On the other hand, the Commission was cautioned about the potential negative impacts that proposed legislation could have on complainants, respondents, and the legal system in Manitoba at large. These negative impacts could include: an increase in lengthy, public and potentially contentious court hearings, potential contractual uncertainty, a decrease in the significant number of out-of-court settlements, and the exacerbation of access to justice issues.

The Commission recommends that any legislation should be drafted narrowly and cautiously, and address only the most pressing concerns.

• any legislation should govern NDAs which prohibit or restrict the disclosure of information concerning claims of harassment, discrimination and abuse.
• it should only require that a complainant have a reasonable opportunity to receive independent legal advice in order for an NDA to be valid and enforceable.
• it should indicate that pre-dispute NDAs (NDAs that are signed by parties before a claim of misconduct is ever made, in order to prevent disclosure following a hypothetical future dispute) are unenforceable.
• information can always be disclosed by a complainant: (1) as required under provincial or federal law, (2) to their lawyer, (3) to persons qualified to provide medical, psychological, mental health, spiritual, or other related support, (4) as required to financially account for, dispose of, or invest the settlement funds, or (5) as required for income tax reporting.

The report examines the state of the law on NDAs in many Canadian provinces, the United States, Ireland, Australia and the United Kingdom.