Non-disclosure agreements (NDAs or confidentiality agreements) have come under fire in recent years due to concerns that they silence victims, conceal unlawful behaviour and prevent companies and regulators from understanding the full scope of systemic problems. These are all valid concerns.

However, the part that often gets overlooked when discussing the use of NDAs is that there are good reasons why NDAs are commonly used. It is important to recognise this when we discuss how they should be used in the future.

What’s good about NDAs?

Let’s say workplace relationships have irretrievably broken down. There are allegations (and sometimes counter-allegations) of wrongdoing. NDAs can give people the choice to cease hostilities and walk away if they want to.

What does the alternative look like? If there was no way to guarantee confidentiality:

• Alleged wrongdoers might feel they have no option but to strenuously defend allegations to protect their reputation and position – as opposed to openly reflecting on how their words or actions have been perceived and seeking to make amends and/or change.
• Businesses might be forced to defend claims that they consider to have little or no merit – the view might be taken that if the business will be exposed to the reputational damage of the allegations being made public, then its best option is to have those allegations tested in a rigorous legal process.
• Importantly, victims might be forced into formal and potentially adversarial complaint and/or legal processes – because those represent the only option for resolution for the reasons above.
• Regardless of the outcome of any investigation, disciplinary and/or legal processes, simply participating in these processes can be traumatising to all the people involved. These kinds of processes often also take some time to conclude, meaning that those people may be stuck in a state of limbo for weeks, months or years.  

The Australian Human Rights Commission recognises this. Its Guidelines on the Use of Confidentiality Clauses in the Resolution of Workplace Sexual Harassment Complaints highlights that “confidentiality provisions can enhance victim-centricity of the response, for example by providing anonymity and privacy where that is the victim’s choice, as well as enabling greater flexibility for the parties to reach a resolution that is faster and less formal than litigation.”

Particularly if the evidence has never been tested in a formal investigation or legal process, there may also be a legitimate interest in parties ensuring that any settlement includes agreed limits on future comments about what can be highly sensitive (but unsubstantiated) allegations.

What kind of steps should businesses think about to ensure NDAs are appropriate?

Drawing on what we have seen overseas and the key themes of the Human Rights Commission’s research and guidance, consider the questions such as the following when using NDAs:

• How can the business ensure the NDA will not inadvertently ‘cover up’ a genuine issue of concern? Even if the allegation was never ‘proven’ or ‘disproven’, is there a process in place to ensure that the fact the allegation was made is accounted for as appropriate in internal data gathering, oversight and decision making?
• Are there the critical, sensitive allegations or facts for which there is a legitimate reason to restrict disclosure? If yes, can the NDA scope be tailored to reflect that? If not, then check the thinking on why an NDA is necessary.
• Does this information have an expiry date, after which time it could be partly or fully disclosed?
• Can partial, deidentified or full disclosure of factual information be permitted in appropriate circumstances e.g., to a doctor or mental health professional when seeking medical treatment, or to a regulator/government agency in the course of an investigation or inquiry or participating in a legal process?
• Is the business willing to offer free independent legal advice to an individual before the NDA is signed, to ensure they understand and genuinely agree to it? (If that’s not an option, the Commission suggests considering providing them with guidance material and information about freely available community legal services who may be able to help.)

In short, a lot can be done to ensure that NDAs appropriately empower genuine choice.

Any suggestion that NDAs (and by extension, that choice) should be outlawed or extensively restricted may end up harming those most directly concerned.