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Prince Edward Island’s new Non-Disclosure Agreements Act

Jacob Zelman and Kate Profit

Prince Edward Island’s Non-Disclosure Agreements Act (“Act”) received royal assent on November 17, 2021 and is set to come into force on May 17, 2022.

The purpose of the Act is stated as being “to regulate the content and use of non-disclosure agreements”. As the first legislation of its kind to be enacted in Canada, PEI will become Canada’s first province to impose limits on the use on non-disclosure agreements (“NDAs”). The Act’s uniqueness also leaves considerable uncertainty around how the Act will be applied and interpreted by adjudicators.

The legislation purports to significantly limit confidentiality clauses as part of the settlement of any alleged harassment or discrimination claims. While specifics around the Act’s interpretation remain to be seen, the Act’s provisions and its language suggest the following:

  • While the motivation for the Act may have been the increased scrutiny applied to NDAs in cases of sexual harassment, the Act’s application appears to be much broader. In addition to “actions, conduct or comments of a sexual nature”, the Act applies broadly to:

(a) harassment, defined under the Act as “any action, conduct or comment that can reasonably be expected to cause offence, humiliation or other physical or psychological injury or illness to a person”; and
(b) discrimination, as defined under PEI’s Human Rights Act.

  • The Act prohibits NDAs covering the above subject matter entered into by a “party responsible.” As defined under the Act, a “party responsible means a person who has an obligation in law to take reasonable steps to prevent harassment and discrimination in the place where the harassment or discrimination occurred or is alleged to have occurred.” This provision has direct application to employers in light of their explicit duty under PEI’s Workplace Harassment Regulations to identify and stop harassment in the workplace along with remedying the effects and preventing future incidents of harassment.
  • Non-disclosure can only be part of the agreement if “it is the expressed wish” of the employee alleging harassment or discrimination. Where the agreement is lawfully entered into, it will be enforceable only where:

(a) the relevant employee has had a reasonable opportunity to receive independent legal advice;
(b) there have been no undue attempts to influence the relevant employee in respect of the decision to enter into the agreement;
(c) the agreement does not adversely affect the health or safety of a third party, or the public interest;
(d) the agreement includes an opportunity for the relevant employee to decide to waive their own confidentiality in the future and the process for doing so; and
(e) the agreement is of a set and limited duration.

Non-compliance with the above requirements may attract a fine of “not less than $2,000 or more than $10,000.

  • Finally, in the event an NDA has been entered into in accordance with the above requirements, disclosure of the subject matter of the NDA will be permitted in specific circumstances (for example to friends, family, counsellors, care providers, lawyers, etc.) and disclosure is permitted if considered “general artistic expression” in relation to the harassment or discrimination. Of importance, the classes of persons to which disclosure is permitted apply retroactively (i.e. to past agreements that include confidentiality requirements) so as to allow disclosure of the subject matter of past agreements to these outlined classes of individuals.

While the full scope of the Act’s application and interpretation is yet to be seen, of certainty is the need for employers to update their practices and the language of any agreements to which the Act may apply so as to ensure compliance with the Act. We encourage employers to seek legal advice from our team as they navigate the changes brought on by the Act.


This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Labour and Employment group.

 

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