Time’s up for Employers Hiding from Sexual Harassment Settlements

During a recent round table discussion held in London in February, Associate Professor Matteo Winkler of Tax and Law at business school HEC Paris proposed that employers should disclose how much they had paid out to settle sexual harassment claims (Ashleigh Wright ‘Employers should disclose sexual harassment claims, says academic’ www.personneltoday.com, accessed 5-6-2018). This is an interesting proposal. This article will consider the limits of privacy and confidentiality relating to the settlement of sexual harassment claims and whether the disclosure as suggested by Prof Winkler is workable and justifiable in South Africa (SA)?

The Labour Relations Act 66 of 1995 (the LRA) is supplemented by the notice of code of good practice on the handling of sexual harassment cases (the Code) published in 1998, it provides that employers should create and maintain a working environment in which the dignity of employees are respected. But could the LRA, and indeed the Code, provide further protective measures for employees by making employers disclose financial compensation paid out to employees who claim sexual harassment?

It would be helpful to briefly consider the current context of sexual harassment in the South African workplace. The Code defines sexual harassment as unwelcome conduct of a sexual nature. Du Toit, Godfrey and Cooper et al in Labour Relations Law – a comprehensive guide 6ed (Durban: LexisNexis 2015) writes that sexual harassment is the most widespread form of harassment and has been the subject of extensive analysis and legislative response. This article does not attempt to be a treatise on the subject. The Code identifies examples of sexual harassment, which includes, but are not limited to –

• all unwanted physical contract;
• verbal forms of sexual harassment;
• non-verbal forms of sexual harassment;
• quid pro quo harassment; and
• sexual favouritism.

The implementation of a disclosure system as described by Prof Winkler would further bolster the provisions of the applicable sections of the Constitution, Employment Equity Act 55 of 1998 (the EEA), the LRA and the Code. Such disclosures are easily hidden and silenced by employers and employees who enter into settlement agreements, which is used to silence the victim, where employers hide behind non-disclosure or confidentiality provisions.

When and how settlement agreements are reached

Employers in SA have long used the process of alternative dispute resolution to settle or compromise on a dispute with an employee, who alleges sexual harassment, by another employee. Mediation, and in fact other forms of dispute resolution, including arbitration and negotiation, have often been hailed as an efficient and discreet way of ending a dispute that could otherwise have been a long and costly legal dispute. In fact, item 7 of the Code provides that a dispute of a sexual nature may be resolved in an informal or formal process and may make use of various internal dispute resolution mechanisms, failing which, the complaint employee may approach the Commission for Conciliation, Mediation and Arbitration (CCMA) for conciliation under s 135 of the LRA.

There does not seem to be any bar set in regard to employers’ compensating complainants financially for transgressions by other employees. While there are no figures or statistics in this regard to show us that employers do pay out compensation as part of settlements – it is not unthinkable that it happens in reality.

How private is confidential?

It has been long thought that the cornerstone to the dispute resolution process is confidentiality. This aspect of private dispute resolution has made mediation a very attractive form of coming to a settlement, as parties are able to keep sensitive and private matters out of court. The inclusion of a robust confidentiality clause may keep private details of sexual harassment settlements out of the public eye.

Item 8 of the Code provides that matters of a sexual harassment nature must be handled in such a way that the identities of parties are kept confidential and that confidentiality must be ensured during the disciplinary inquiry.

It is trite that during certain dispute resolution processes parties are bound by an agreement not to discuss the process or divulge information to third parties, but when does this limitation and right to privacy end? Put another way, what becomes of confidentiality after dispute resolution has taken place and a settlement has been agreed on, the aggrieved employee who alleged the sexual harassment suffers from a kind of buyer’s remorse? (See Alan Rycroft ‘Legal review of the mandatory mediation process in South Africa’ (2016) 1 Mediation Theory and Practice 79). Could the aggrieved employee claim a myriad of allegations, including but not limited to duress, misrepresentation or undue influence?

The Rules for the Conduct of Proceedings before the CCMA, relating to conciliations were amended during 2015, and r 16 now reads:

‘1) Conciliation proceedings are private and confidential and are conducted on a without prejudice basis. No person may refer to anything said at conciliation proceedings during any subsequent proceedings, unless the parties agree in writing or as ordered otherwise by a court of law.

2) No person, including a commissioner, may be called as a witness during any subsequent proceedings in the Commission or in any court to give evidence about what transpired during conciliation unless as ordered by a court of law.’

The effect of this amendment provides that a court of law may order that evidence of what transpired during conciliation proceedings be produced. This means that the dispute resolution process is not afforded absolute privilege such as the attorney-client privilege.

This point was made clear in the recent Constitutional Court (CC) judgment of September and Others v CMI Business Enterprise CC 2018 (4) BCLR 483 (CC) where the court examined the well-established concepts of negotiation privilege, settlement privilege or privilege attached to statements made without prejudice. The CC quoted DT Zeffertt and AP Paizes The South African Law of Evidence 2ed (Durban: LexisNexis 2009) at 700: ‘Statements are made expressly or impliedly without prejudice in the course of bona fide negotiations for the settlement of a dispute may not be disclosed in evidence without the consent of both parties.’

However, the court held that statements or admissions made during the course of settlement negotiations, that are unconnected to or irrelevant to the settlement are not covered by the rule.

The court stated at para 70 that the purpose of r 16 was to –

‘promote frank discussion and early settlement of disputes, is properly served by the application of the common law rule of settlement privilege. The interpretation of rule 16, as contended for by the respondent, to impose a blanket ban on the entirety of the content of conciliation proceedings, does not further promote this purpose, or serve any legitimate purpose.’

The court went on further to state at para 71:

‘There may have been concern about determining the scope of the privilege under the rule with reference to the common law, given that conciliation involves lay people who may not know the common law parameters on privilege. And without legal advice, they could be inhibited from participating freely in the discussions. Since the rule has been amended, parties involved in conciliation would know that whatever is said during conciliation proceedings may be disclosed in subsequent proceedings with their consent or if ordered by a court. It is assumed that such an order would be issued sparingly and where the interests of justice warrant disclosure.

It is clear now that statements or communications by parties during a settlement or conciliation may be disclosed by means of a court order. In fact, the CCMA rules allow that the commissioner may even be called as a witnesses should the interest of justice allow. If the idea of in the interest of justice is used as the test for disclosures, should legal practitioners not make the extrapolation that the disclosures of financial settlements – by employers to claimants – would be in the interest of justice as proposed by Prof Winkler. The penalty of making such a disclosure would mean that the writing would be on the wall for those perpetrators and employers who do not take the curbing of sexual harassment seriously. An employer may be liable under s 60 of the EEA for having failed to take reasonable steps to protect an employee on becoming aware of circumstances of sexual harassment at work by another employee, as was the case in Liberty Group Limited v M (2017) 38 ILJ 1318 (LAC).

In reality though an employer’s astute legal adviser would ensure that the settlement agreement disallows the complainant from pursuing further legal remedies as it is in ‘full and final’ settlement.

Prof Winkler states that employers may lie about how many sexual harassment cases they have settled to keep their reputation and public image untarnished and submits that it would be very difficult to hide these settlement agreements if financial compensation was made to the victim and reflected in financial accounts (Wright (op cit)). In other words, Prof Winkler envisions a more rigorous financial auditing and recordkeeping by companies who wish to meet the compliance guidelines of regulatory bodies, such as perhaps the Department of Labour or the South African Revenue Service.

A new way forward

With recent cases such as Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC), there seems to be a push for parties in negotiations to act in good faith. The court held that there was a duty to negotiate in good faith – to the extent that the common law was at odds with this view, it argued, the common law required development in accordance with s 39(2) of the Constitution.

I submit that the legal principles of settlement agreements and negotiation may be pushed towards transparency if it is built on the principle of contractual good faith, as envisioned by the CC in watershed cases such as Everfresh. Perhaps this further step of obliging employers to be transparent and disclose settlement amounts would be an additional arrow in the quiver of complainants and a deterrent for employers who do not offer adequate protective measure for employees.

 Kershwyn Bassuday LLB (UKZN) LLM (UCT) is a lecturer in the Department of Commercial Law at the University of Cape Town.

This article was first published in De Rebus in 2018 (July) DR 36.