“Banning non-disclosure agreements would leave employers with little reason not to maintain litigation.”

Workplace sexual harassment is a prominent topic these days. Australian Human Rights Commission research suggests one in three employees were sexually harassed at work in the past five years.

This is an alarming statistic. If it’s correct, it’s curious that relatively few people are accused publicly (through the media or courts) of workplace sexual harassment.

To my mind, there are two reasons for this. First, victims have few incentives to come forward publicly. Second, many settle their complaints privately. These settlements routinely include binding deeds of release, under which the complainant exchanges their public silence for money (often known as non-disclosure agreements).

Non-disclosure agreements prohibit the parties from discussing the circumstances surrounding the settlement, as well as the terms of the settlement itself. These agreements, in workplace sexual-harassment matters, have come under fire recently. In June last year, the Human Rights Commission announced an inquiry into workplace sexual harassment. It encouraged victims to make confidential submissions to the inquiry, but the commission said many feared the legal consequences of breaching their non-disclosure agreements.

In response, Sex Discrimination Commissioner Kate Jenkins and the Minister for Jobs, Industrial Relations and Women, Kelly O’Dwyer, urged Australian chief executives to grant limited waivers of victims’ confidentiality obligations to allow them to make submissions. To date, only 38 organisations, including the ACT Public Service and the Commonwealth Bank, have obliged. Jenkins has said non-disclosure agreements make victims “invisible” and “silenced”.

In the wake of the inquiry, there have been calls to ban the use of such agreements. The agreements, it is said, prevent statutory bodies such as the Human Rights Commission from gathering the data they need to craft recommendations on how to reform sexual-harassment laws. In a Sydney Morning Herald opinion piece, RMIT professor Judith Bessant called for change, labelling the use of non-disclosure agreements a form of “secondary victimisation” that could “compound the damage done” to victims.

After it was revealed that alleged serial-harasser Harvey Weinstein had regularly entered into confidentiality agreements to resolve claims of sexual harassment and assault against him, the US Congress introduced the EMPOWER bill in March this year. If passed, this bill would require public companies to report on settlements in sexual-harassment claims and would more tightly regulate non-disclosure agreements. In Britain, Prime Minister Theresa May called for a review of the use of agreements in sexual-harassment claims in the wake of similar allegations against British billionaire Sir Philip Green.

Proposals to ban these agreements are well-intended but a ban would not, in my opinion, bring victims greater access to justice.

While perhaps unseemly to some, in the era of risk (including reputational risk) management, confidentiality is attractive to businesses (and to the people accused). One of the main reasons employers engage in settlement negotiations with employees who say they were sexually harassed at work is because of the prospect of the process remaining confidential.

To put it plainly, why pay someone to drop a claim if they can still publicly tell everyone you have done so, thereby cementing your guilt in the public eye? A significant risk in requiring the beans to be spilled on a settlement is that the accused sees defending the matter through to court as necessary to achieve public recognition of its (in the case of an employer) innocence.

The inevitable result of banning non-disclosure agreements then becomes that employers who receive harassment claims will have little reason not to maintain litigation. This will drag sexual-harassment victims seeking early justice from the office into the courtroom. Note that, in most cases, the complainant sues the employer under the vicarious liability provisions of the relevant legislation.

Nonetheless, infrastructure investment group IFM recently publicly paid about $500,000 to settle a sexual-harassment case. The settlement (and sum) were reported widely due to the lack of a non-disclosure agreement between the parties. In that case, 27-year-old Nathalie Abildgaard sought compensation for sexual harassment and constructive dismissal. She alleged an executive director, Frederic Michel-Verdier, made several advances of a sexual nature, which forced her to leave the company. Michel-Verdier denies these allegations. Abildgaard refused to settle her matter with a confidentiality agreement and will reportedly give a portion of her agreed settlement moneys to a charity she set up to assist other victims of workplace sexual harassment.

This was a successful outcome for Abildgaard. However, this result is not easily replicable for other victims. The case was heard in an eight-day public trial in January this year, with oral submissions due to be heard last month. IFM chose to settle the matter before those submissions, offering Abildgaard a sum greater than what she had sought. It’s likely that IFM assessed that its prospects of successfully defending the case were low, and that further damaging statements about the business would likely be made public.

Two things are worth noting here. First, this non-confidential settlement occurred after a public hearing (so the facts of the matter were never going to truly be “private”). Second, it appears that Michel-Verdier remains employed by IFM – the lack of a non-disclosure agreement has not caused his resignation or dismissal.

Notwithstanding the IFM case, restrictions on non-disclosure agreements will likely have a diminishing effect on the number of victims who report sexual harassment to their employers. While it is true that many brave victims will be prepared to escalate matters and have their day in court (indeed, this option is still open to them under our current system), it is equally true that many people would be inclined to avoid court altogether, preferring a swift settlement.

Pursuing a successful claim for sexual harassment under our legal system is no easy feat. Litigation can be lengthy and prohibitively expensive. Human Rights Commission data shows it takes, on average, more than four months before a complaint lodged with the commission will come to conciliation – and, if conciliation fails, this is only one step in an even longer process. This is also saying nothing of the emotional costs of litigation, which are considerable, with many victims finding the process traumatic.

Also at issue is the fact that victims who are forced to go to court are likely to lose their right to privacy and anonymity, which is a right that is enforced under a non-disclosure agreement. The reality is that, despite recent news coverage of the topic, suppression orders in Australia are rare and court battles are usually fought publicly.

Taken together, if Australia does ban non-disclosure agreements when settling sexual-harassment disputes, this will set us on a path where, in most cases, victims’ only form of recourse is public, expensive and emotionally-draining litigation. While reforms are needed to help tackle and prevent workplace sexual harassment, focusing on confidentiality agreements is unlikely to solve the issue and risks creating further hurdles for victims.

John Wilson is the managing legal director of BAL Lawyers and an accredited specialist in industrial relations and employment law. He thanks Rebecca Richardson for her help in preparing this article.

This article first appeared in The Canberra Times.

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