Non-disparagement provisions strike at the important constitutional value of freedom of expression, which should not be lightly interfered with, similar to overly broad restrictions on earning a livelihood (non-competition provisions) or overly broad restrictions on access to the courts (arbitration provisions).
While most employment law and commercial litigation practitioners will not have been surprised by the recent Court of Appeal decision in Heller v. Uber Technologies Inc., 2019 ONCA 1, there is a little kernel of obiter in the decision, which, in this writer’s view, will be the nail in the coffin of non-disparagement provisions contained in employment law releases that seek to restrain truthful speech on matters of public interest, such as occurrences or complaints of sexual or other abuse or harassment in the workplace.
In the Uber decision, in considering the unconscionability of the arbitration provision in the agreement between the company and drivers, the Court of Appeal for Ontario referred to the existing four elements of the test for unconscionability in Ontario set out in Titus v. William F. Cooke Enterprises Inc., 2007 ONCA 573. The four elements are “a grossly unfair and improvident transaction,” “a victim’s lack of independent legal advice or other suitable advice,” “an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability,” and “the other party’s knowingly taking advantage of this vulnerability.” It’s not an easy test to satisfy.
However, the Court of Appeal in Uber then references the different and lower test applied by the British Columbia Court of Appeal in Morrison v. Coast Finance Ltd.(1965), 1965 CanLII 493 (BC CA) as requiring only “inequality of bargaining power” and “unfairness.”
This lesser test was applied by Justice Rosalie Abella in her concurring reasons in Douez v. Facebook, Inc., 2017 SCC and appears to be the test applied by the dissenting judges in Douez.
The court in Uber then concludes on this issue by extending what I consider to be an invitation to counsel in future cases. In this regard, Justice Ian Nordheimer states, “I do not consider it necessary to resolve the question of whether the decision in Douez has changed the proper elements to be applied in determining unconscionability in Ontario because, under either test, I find that the Arbitration Clause is unconscionable.”
The fact that there is inequality of bargaining power in the employment law relationship has long been recognized, including by the Supreme Court of Canada in Elsley v. J.G. Collins. I see this imbalance of power in every employment law case I have ever mediated. The employee who has been terminated, who is without income pending a settlement with the employer, who is often represented by counsel in a contingency arrangement, is almost powerless to resist the last-minute inclusion in a full and final release of a broad-ranging confidentiality and non-disparagement provision once the best offer has been obtained from the employer.
In today’s #MeToo world and with the growing rejection of workplace harassment, it is not a far stretch to conclude that any non-disparagement clause that extends to limit freedom of expression on matters related to sexual and other abuse or harassment in the workplace will be found to be contrary to public policy and unfair. The University of Michigan recognized this reality in waiving the confidentiality clause in its settlements with young gymnasts so that they could speak openly about the abuse they suffered at the hands of Larry Nassar, a doctor at the university. This has become not only a legal issue but a potential public relations nightmare for employers.
Courts, too, have already shifted to recognize this issue. In Watson v. Salvation Army, 2018 ONSC 1066, the Superior Court of Justice found that an employment release extending to all claims “arising out of the employment relationship or the termination of that employment” and “in any way related to or connected with my employment of the ending of my employment” did not prevent a subsequent civil claim for sexual harassment since, as the court somewhat tenuously found, “While many of the alleged events occurred at the place of employment and, perhaps, because of the employment, sexual harassment, intimidation and other improper conduct are not connected to employment. They are clearly separate matters.”
Employers would be wise to anticipate the end of abusive non-disparagement clauses. There is a risk, like with overly broad non-competition clauses, that a court will not only refuse to enforce the provision in circumstances of harassment but will also throw the entire provision out. In order to attempt to mitigate this impact, employers should consider amending their releases to require only reasonable confidentiality and non-disparagement obligations, to extend its terms to not only the employment relationship but beyond and, while not intuitive, specifically allocate, where appropriate in the circumstances, some of the termination payment to claims for sexual or other harassment, without any admission of the existence or liability for such claims.
Howard Winkler is Toronto lawyer and mediator who has practised the law of defamation and employment-related law for more than 30 years on behalf of media, plaintiffs and defendants.