Why Mediators Need to Stop and Think Hard about Facilitating NDAs in Settlement Agreements

It’s been a long day of mediation. An agreement seems to be emerging, to the relief of the plaintiff whose human rights complaint against the defendant employer has been dragging on for months.

Late in the day, the defendant – represented by in-house counsel and an agent for their insurer – introduce their “standard release” into the discussion. The release covers the usual ground of withdrawing the complaint and includes the following:

“The parties agree to keep confidential all the terms of this settlement agreement, including the settlement amount and also the events that led to the settlement and the existence of this settlement. 

The parties agree not to disclose any identifying or other information about the parties and the events. This confidentiality also applies to disclosures to family, friends or professional counsellors. 

The plaintiff also agrees not to make any negative or disparaging comments about the defendant and the defendant’s business, including but not limited to social media.”

The plaintiff and her lawyer review the release. Having sensed that a settlement was close, the plaintiff seems disconcerted by the clause. Before you bring the parties back together, she asks her lawyer “Is this necessary? Can I really not talk to my family – or even my therapist? I don’t want to sign that.” Her lawyer responds by telling her that this is “standard practice”. And cautions her that this is what the other side “expects” in any settlement.

True enough, you see similar clauses in most civil mediation agreements now, especially cases involving human rights claims.

Back in joint session, the plaintiff’s lawyer says that her client would like some reassurance about the release. “It’s standard practice, I’m sure you have told your client that?” When the plaintiff tries to ask more questions, defence counsel sighs impatiently and says “It’s for your own protection. You don’t want your name all over the newspapers or social media, do you?”. The plaintiff looks horrified – of course not, she says.

The parties sign. Another good day’s work done.

Or is it?

What’s the problem?  

Non-disclosure agreements (NDAs) have become the default solution for organisations, corporations, individuals and public bodies to settle cases of sexual misconduct, racism, pregnancy discrimination and other human rights violations.  They are used not just to cover up misconduct and abuse in workplaces, universities and religious institutions – but to hide faulty products, addiction issues in gambling, the abuse of minors in sports training, the use of public funds in settlements and more – the list is long and shocking. These agreements, which threaten people with legal consequences, are being used to cover up abuse, and in some cases criminal acts.

NDAs:

• Allow a person who has behaved abusively and possibly criminally to remain in their workplace or move to another workplace with a clean record.  

• Gag victims permanently, often preventing them speaking to family, friends or even a therapist about what has happened to them, or warning others about the perpetrator or malpractice. 

• Outside the workplace, NDAs are increasingly being used in settlement agreements to cover up defective products, accident causes, and other public dangers

• Benefit the employer’s reputation and the career of the perpetrator, not the victim or whistleblower (who can be protected by a simple confidentiality clause).  

• Require the victim and in some cases their colleagues to tell lies, or risk being sued for “defamation” as the truth is hidden by an NDA. 

• Are usually pressed on victims who are told they “must” sign if they want a settlement. 

• Chill the climate for anyone wishing to speak up about wrongdoing 

The NDA habit

Gathering accurate quantitative data on the prevalence of secret agreements is, of course, hard if not impossible. Here is what we do know.

• NDAs were originally created to protect trade secrets during the tech bubble. In the last 5 years, their use appears to have grown exponentially making everyone’s bad experience at work, as one lawyer put it to me, “a trade secret” (for a fuller discussion of this development, and the beginnings of US caselaw on NDAs, see my article here (“How a Good Idea Became a Bad Idea”)

• The areas in which NDAs are regularly used now include harassment, bullying, discrimination and abuse claims; product liability cases; personal injury cases (especially where there is a catastrophic incident caused by negligence or misconduct); and all kinds of human rights cases, inside or outside the workplace

• The growth in use of NDAs as a bargaining ultimatum – a “must-have” tactic which like every other such tactic, is almost always bluff and bluster – seems to mirror the growth of social media and concerns that corporation reputation might be tarnished by disclosure of lengthy and incompetent responses to workplace misconduct, especially by senior employees against more junior employees

• Data collected by Speak Out Revolution in the UK (but with respondents world-wide) finds that currently 33% of their approximate 600 respondents who made a formal workplace complaint either signed an NDA, or “cannot say so for legal reasons” (meaning, they signed one. Many of those who sign NDAs have been told that even acknowledging the existence of a secrecy pact would be a breach of their settlement agreement and would result in them losing their settlement.

What does this mean for legal representation?

I am not going to rehearse here the debate over party driven outcomes in mediation. I think most mediators understand and accept that the parties should determine the outcome, not the mediator – or the lawyers.

The difficulty lies in determining who decides – lawyer or client. Because for most lawyers, including plaintiff lawyers using some shockingly bogus arguments, NDAs have become an unthinking default part of settlement agreements.

Candid lawyers now acknowledge that up to 95% of civil settlement agreements include an NDA or other approach to silencing the claimant (eg a non-disparagement clause, such as in the hypothetical “release” above). There have been some so far limited and thus far ineffectual efforts to steer lawyers away from indefinite, all-embracing NDAs, for example by the Solicitor’s Regulatory Authority in England and Wales. 

But this practice implicates mediators too. 

Implications for mediators

I am alarmed at the spread of gagging agreements and almost as alarmed at the fact that this is happening in mediation, every day. Among all the individuals I have spoken to about signing an NDA, none understood the implications of what they were signing, all felt bullied and coerced and all regretted it. 

Should mediators be facilitating agreements that are oppressive and potentially unenforceable – for duress, lack of informed consent, public policy, or all three? NDAs are the result of an unequal bargaining relationship and a false ultimatum – you must sign to settle –  and as mediators we need to recognize this and proceed with caution when one side might use mediation to take advantage of the other. 

I believe that mediators should at minimum be taking special care to ensure that complainant/ plaintiff parties fully understand the implications of signing an NDA and appreciate its scope and its longevity (unlike other types of  traditional restraint provisions, NDAs are indefinite).  What is more, many complaints process now require an NDA before participation and again mediators will potentially facilitate this (it may be in their terms of mediation, or if transacted separately with the organization or administrative body, a pre-requisite for mediation). 

There is an important role and opportunity here for the mediation community, to step up and take a principled, professional stance on NDAs that clearly distinguishes what we do to try to help parties resolve disputes from a transactional, expedient, approach to settlement. In an upcoming campaign to ban NDAs other than for trade secrets (which I have initiated with my co-founder Zelda Perkins) I hope mediators will come forward with their support for our campaign (the website will shortly be live).  The current system relies on the complicity of mediators in making these oppressive bargains and I hope that we can separate ourselves from what is soon going to be a reckoning as pressure builds for legislative reform. 

I hope that most of my fellow mediators believe that complainants should be able to speak up and that this right is intrinsic to the work we do. How do we square that commitment with allowing vulnerable parties to bargain that right away?  

                       

Julie Macfarlane

Professor Julie Macfarlane is a Canadian law professor who has spent her career researching, writing about and advocating for access to justice. She is Director of the National Self-Represented Litigants Project, and now Emerita Distinguished University Professor at the University of Windsor. Julie has researched and written on the legal… MORE >