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https://www.minterellison.com/articles/transforming-ndas-to-prevent-sexual-harassment

Transforming NDAs to prevent sexual harassment

6 minute read  01.02.2021 Amanda Watt

The risk lens through which boards respond to sexual harassment by senior corporate leaders needs a refocus.

The risk lens through which boards respond to sexual harassment by senior corporate leaders needs a refocus. The priority must expand from minimising reputational damage and legal liability to creating a culture and systems which ensure a physically and psychologically safe workplace for all. Shareholders, investors, employees, regulators and the community now expect this change in approach.  
Traditional NDAs are not an effective way of solving a deeper governance issue for boards, which is workplace health and safety”  
 

Recent events in corporate Australia have shown, the failure to prevent and adequately respond to sexual harassment on a systemic basis creates complex and extensive risks to organisations. These risks extend beyond reputation and breaches of workplace health and safety and anti-harassment obligations, to significant distress to those impacted by sexual harassment (complainants), extensive losses of productivity and profitability, scrutiny of leadership succession, and diminution of shareholder confidence.

Non Disclosure Agreement limitations for Boards

When sexual harassment occurs at the executive level in an organisation, and managing the crisis reaches board level, the ‘go-to’ tool for managing reputational damage is often a non-disclosure agreement (NDA). NDAs are legally enforceable confidentiality agreements or confidentiality clauses in agreements between organisations and complainants. A financial sum is provided to the complainant by the organisation in settlement of the sexual harassment matter in exchange for the complainant's agreement not to discuss the matter publicly or take legal action against the organisation.

However, these traditional NDAs are not an effective way of solving a deeper governance issue for boards, which is workplace health and safety.

Shutting down the issue

The secrecy enforced by an NDA may prevent reputational damage to the organisation and minimise the risk of litigation over the matter, but this secrecy protects the perpetrator while offering little in the way of protecting a complainant and their ongoing wellbeing. Critically, adoption of NDAs in this traditional form also prevents transparency of patterns of behaviour, thereby reducing the ability of the organisation to prevent sexual harassment on a systemic basis.

Serial perpetrators can move on to new complainants and/or new workplaces - without fear that their history will become known.

The recent report from Male Champions of Change entitled; Disrupting the System, Preventing and Responding to Sexual Harassment in the Workplace, to which I contributed, noted that:

"In the past, many organisations have prioritised legal responses and ’shutting down the issue’, driven by reputation management."

"This can have the perverse outcome of protecting and/or emboldening higher-status employees at the expense of complainants, their co-workers and the broader interests of the organisation and the community in naming and tackling sexual harassment. Commercial settlements and non-disclosure agreements often reinforce this view and ensure issues are kept out of the public domain and opportunities to learn from cases are diminished."

Fight or flight

There are growing calls for NDAs to be used only when requested by a person who has experienced sexual harassment, reflecting the reality that, over time, a complainant may change their perspective on the harassment.

Consider the impact of the current method of dealing with sexual harassment complaints on the complainant. In my experience complainants often think long and hard before they complain, especially about powerful people, because they just want the conduct to stop and their career not to be impacted.

They have observed over the years many examples of particular high-profile offenders leaving organisations with significant payouts and fresh opportunities, while the complainant, due to the media attention and notoriety, has not worked again, or has had to move interstate or go overseas for employment. By the time a complainant complains about sexual harassment by a senior person their nervous system has usually been in a state of fight or flight for a long period of time.

Signing an NDA may present to a complainant as a means to protect their privacy and finalise what has been a period of great anxiety and to move on with their life, but retaining agency over the ability to tell their story in the future, should they so choose, can also be important to their ultimate wellbeing.

The great power of storytelling is that it puts a human face to the egregious behaviour, making it more likely that an organisation will learn from the complainant's experience and minimise the risk of sexual harassment occurring in the organisation again.

A new way forward

The Male Champions of Change are urging their member organisations to be more transparent about sexual harassment, commencing with an openness that this problem exists in their workplaces. They are also advocating that once any investigation is complete, organisations will not restrict the complainant’s right to speak even if they have signed an NDA. In addition, where there is substantiated conduct by a senior leader, and there is legitimate public and stakeholder interest in the matter, their member organisations may reveal the perpetrator's identity.

In this context, NDAs are transformed in nature from covert, potentially damaging organisational responses to sexual harassment, to vehicles which aid in a complainant's healing and confirm to the organisation's stakeholders, shareholders and the wider community in which it operates, that its most senior leadership does not tolerate sexual harassment in its workplaces.

How does an NDA work, when future disclosure by one of the parties stays on the table? One solution to this is a new form NDA where all parties agree to an NDA that provides confidentiality in clearly articulated circumstances, but also places the complainant at the heart of the solution, by supporting their recovery and empowering them to tell their own stories in the way that they want to, if they want to.

 

This approach promotes transparency, improves reporting and provides a structure for managing the risk.”    

 

A better way to prevent sexual harassment in the workplace is to enable the leadership, culture and systems that provide a safe workplace for all. Workplace safety protects the organisation's people from the physical and psychological harm caused by sexual harassment, which destroys productivity and innovation. Workplaces need to be safe so everyone can bring their best self to work; that’s when organisations can really unleash the potential of productivity and provide shareholder value.

Disrupting the System recommends that organisations ‘inform, empower and expect everyone to speak up and take action on sexual harassment in the workplace’. It provides a range of resources for boards and those responsible for managing workplace risk and safety to improve their approach to managing sexual harassment.

New form NDA. Transparency while respecting the complainant’s wishes

The approach for a new form NDA presupposes that a confidential investigation has been completed. It supports several Male Champions of Change transparency and confidentiality principles presented in Disrupting the System, p.44.

A new form NDA:

  • would only include confidentiality clauses if the complainant agreed
  • would be clear on the limits of that confidentiality, including as to engaging with regulators on the matter
  • would protect the complainant's identity and privacy
  • could make the amount of any settlement payment to the complainant confidential
  • would not preclude the complainant from speaking about the complaint at any time in the future so they retain agency over how their story is told.

A new form NDA would expressly carve out the right of the organisation to disclose, both internally and externally, that a complaint had been made and how it had been dealt with and any substantiated outcomes (in a de-identified way) so it can include that matter in its aggregated data.

It would also carve out the right to disclose the perpetrator's identity where there is a legitimate public or stakeholder interest and an investigation has found that the allegations are substantiated. These carve-outs are essential for ensuring adequate transparency to enable the systemic prevention of sexual harassment and to ensure the organisation fulfils its duty of care to all its people.

This article first appeared in ANZ BlueNotes in November 2020.

Amanda Watt was a contributor to Disrupting the System, Preventing and Responding to Sexual Harassment in the Workplace, published by Male Champions of Change (September 2020).

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https://www.minterellison.com/articles/transforming-ndas-to-prevent-sexual-harassment

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