According to the Qantas Group code of conduct and ethics, Qantas states that as it is an ASX-listed company, “authorised employees must ensure that only public information is provided when answering questions asked by external parties” and must not “directly or indirectly engage in any activity which could by association cause the Qantas Group public embarrassment or other damage”.

Following the Four Corners report, Lawyers Weekly spoke to three employment lawyers about non-disparagement and non-disclosure clauses and how common they are in Australian businesses.

Adero Law managing director Rory Markham said that clauses like these are increasingly common within larger corporations — and have evolved since their inception.

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“Historically, such clauses were the domain of higher-level executive contracts and were intended to preserve the so-called sanctity of the board room process. Corporates like Qantas are now applying these clauses to wholly different business drivers, such as genuine concerns for safety, workplace culture and inclusion.

“These clauses have far more bark than bite — they are effective at silencing existing employees and senior managers in a public setting, but near hopeless once a claim becomes litigated or a regulator gets involved,” he told Lawyers Weekly.

“There is also real doubt that such clauses, in perpetuity, can have any effect. The notion of permanent restraints existing beyond the doors of the employer are liable to be challenged in the same form as restraints of trade — with the employer needing to show a legitimate business interest in silencing the commentary of a worker on reputational grounds. As is clear from litigation in this space, the employer will need to show that any and all silencing of reputation or disparaging remarks was a necessary and proportionate position to protect the legitimate business interest of the employer.”

Swaab partner Michael Byrnes echoed a similar sentiment — and said that non-disparagement clauses are “almost universal in settlement agreements resolving employment disputes relating to the termination of employment” but not necessarily as common in standard employment contracts.

“A fundamental objective in such settlements is finality. That aim is undermined if the employee continues to disparage the former employer either privately or publicly or canvass matters that were the subject of the dispute. Such settlements almost always also affirm the obligation of the former employer not to disclose confidential information and can also prohibit the disclosure of certain other sensitive information (that could harm the employer but might not fall within the scope of confidential information),” he said.

“Less common are clauses in employment contracts that purport to prevent an employee [from] disparaging the employer after the employment relationship ends. While clauses prohibiting the disclosure of confidential information are usually expressed to survive termination of employment, and can still be enforceable at that time, query the enforceability of a clause that purports to prevent a former employee from disparaging their former employer in perpetuity (absent some specific consideration for the clause as usually occurs in the settlement of an employment dispute relating to termination of employment).

“Employers may need to rely on other causes of action such as defamation (where individuals are disparaged) or injurious falsehood. Of course, the very presence of the post-employment non-disparagement clause may have a deterrent effect.”

Coutts Lawyers & Conveyancers partner Karena Nicholls said that she sees non-disparagement clauses more frequently on settlement deeds than she does on employment contracts — but have to rely upon certain considerations of fairness.

Considerations of fairness include whether the clause would cause a significant imbalance in the parties’ rights and obligations arising under the contract; whether it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and whether the clause would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

“There have been a number of cases in the ACCC claiming that non-disparagement clauses are ‘unfair’ from a consumer perspective,” Ms Nicholls said.

“The ACCC has publicly said: ‘Any standard form contract terms that prevent or limit a customer from making public comments about goods or services are likely to be unfair under the ACL’. Businesses that include them in standard contracts should consider what, exactly, is being prohibited and whether they will be seen to overstep the mark.

“But what about in an employer and employee relationship? [This depends] on the terms of the employment contract and its purpose of the clause. Breaches of contract can be litigated by employers even after the contract has ended; however, care should be taken as to the considerations as to fairness. Defamatory actions may also be brought.”

Whether these clauses are effective, however, can often entirely depend on different personalities — with breaches hard to determine. 

“It is a trite proposition that a party to an agreement acting contrary to a non-disparagement clause is at legal risk. Human nature being what it is, however, breaches are not uncommon. People often can help themselves, especially in private conversation,” Mr Byrnes explained.

“Breaches can be hard to detect and even harder to effectively litigate unless, of course, they are on social media, which is increasingly common. Facebook still seems to be the platform of choice. Screenshots are hard to deny.”

In his view, clauses that cannot link breaches to a legitimate business interest are “likely to be mere window dressing after the employment has ended,” Mr Markham argued.  

“Corporates are well aware of such limits in modern practice and will often require or invite exit deeds and handshake payments to buy such rights or benefits in perpetuity. These post-employment deals are not subject to the same reasonable restraint analysis that employment contracts fall under,” he said.

“It should also be added that such clauses will also not impact employers’ rights to make workplace complaints or inquiries within the meaning of the Adverse Action claims under the Fair Work Act. Contractual clauses have no effect in the statutory contract and may (if enforced by an employer) constitute the very adverse action that the Fair Work Act prohibits through damages, injunctions and reinstatements. Lawyers within the FWA are well aware of the expansive coverage that is captured by workplace complaints and enquiries — including complaints made to third parties.”

In terms of whether employees can actually be persecuted for breaches of non-disparagement clauses, it’s fairly uncommon in the legal sphere.

“Breaches of non-disparagement clauses are not commonly litigated. They are more frequently the subject of correspondence between lawyers, usually soon after a settlement when there is an alleged breach, rather than ending up in the courts,” Mr Byrnes added.

“Former employees can, and are commonly, be sued for a breach of confidential information or breach of non-disclosure obligations. It is less common for employees to be sued for a breach of a non-disparagement clause. Employers are wary of the ‘Streisand effect’, where court action could bring more attention to the disparagement than the original remarks.”

This is one of the drawbacks of non-disclosure and non-disparagement clauses — in addition to whether they have a positive or negative effect in certain situations, according to Mr Byrnes.

“The benefits of such clauses are to help preserve and protect the reputation of the employer and to bring a finality to any issues that might have been in dispute between the employer and employee,” he said.

“The drawbacks of such clauses are that enforcement can be difficult, and they can sometimes establish an unrealistic expectation as to the effective practical power to assure there will be no disparagement or disclosure. There is also a very active debate about the role of non-disclosure agreements in the settlement of sexual harassment matters. Some argue the effect of such clauses is to hide and perpetuate such conduct, putting current and future employees at risk.”

Whilst Mr Markham submitted that there is “a substantial jurisprudence on enforcing non-disparagement via injunctions or undertakings following a settlement deed,” despite there being no key precedent decision to look back to.

“However, the willingness of courts to grant injunctions against speech or publication carry a very high threshold — where an employer would need to show harm or ongoing damage beyond a monetise loss,” he said.

“Here again, such injunctions would be limited to business secrets or commercial in-confidence discussions — rather than reputational harm.”

Mr Markham also warned employers not to “invite ridicule of any broad sweeping attempts to silence a workforce”.

“There is a legitimate interest in protecting a brand by an existing workforce and protecting commercial and sensitive information beyond the employment relationship. The capacity of the legal system to protect such interests is well known. However, going beyond that path to suppress basic speech or genuine concerns by past workers will be met firmly by any plaintiff lawyer worth their salt and will backfire in the longer term. There is nothing more potent to a news story than an employer trying to suppress speech with an Orwellian view of its rights to brand protection,” he concluded. 

“A truly wicked idea for a corporate to consider is paying existing employees for such benefits and having a genuine discussion about the brand protection during an exit interview. However, we live in very simple times where rights and restraints are proclaimed from on high — rather than agreed.”