Settling with an Airline? Read the Fine Print
Beware of Confidentiality Clauses and NDAs

October 21, 2023

There are some signs that Canadian airlines may be coming around to recognize that a negotiated settlement is generally preferable to formal adjudication. But there is a catch.

Airlines tend to include a confidentiality clause in the fine print of their offers to settle. A confidentiality clause is a gag order that prohibits you from talking to anyone, other than your lawyer, about the details of the settlement.

While a settlement may save you time and anxiety now, a confidentiality clause may cause headaches later and you may be giving away too much.

A Serious Lifetime Commitment

While settlement privilege may preclude you from using settlement discussions as evidence in a legal proceeding, a confidentiality clause also prohibits you from talking about the settlement outside of the legal proceeding.

The effect of signing an agreement with a confidentiality clause is that you cannot talk about it to anyone, other than your lawyer. Not on social media, not to your coworkers, not to your friends, and not even to your family members. Not now and not anytime in the future.

The Nova Scotia Small Claims Court aptly held that:

A confidentiality clause is a significant burden on a party. It represents a restriction of his or her freedom of speech.

A Binding Obligation Enforceable in Court

A settlement agreement is a contract. Once it has been reached, it is binding on both parties. Courts will likely enforce a confidentiality clause in much the same way as any other contractual obligation set out in a settlement agreement.

If you breach a confidentiality clause, a permanent injunction may be granted against you and you may have to pay for the airline’s legal costs as well as repaying the amounts the airline paid you.

An Unreasonable Condition for Settling Passenger Claims

Many of your rights as a passenger, such as the ones set out in the Air Passenger Protection Regulations (APPR), are also regulatory obligations for airlines. For example, an airline’s failure to pay compensation owed to you under the APPR is also a regulatory offence, punishable by a penalty or fines.

The law does not permit airlines to impose additional conditions for paying you what is anyway owed to you as a matter of the airline’s regulatory obligations.

It is unreasonable for the airline to require you to sign away your freedom to speak about the settlement in exchange for a payment that the airline has to make to you.

May Be Used to Cover Up Wrongdoing

Confidentiality clauses and non-disclosure agreements (NDAs) were developed to protect legitimate commercial interests, such as trade secrets and sensitive financial information. They are not uncommon in settlements of commercial litigation, which do not involve individual consumers.

Over the years, confidentiality clauses and NDAs have become prominent tools for covering up wrongdoing, to such an extent that the Canadian Bar Association recently passed a resolution against their misuse to silence victims and whistleblowers.

By agreeing to a confidentiality clause, you may be inadvertently helping the airline to cover up its own wrongdoing in failing to pay you compensation that was owed to you under the law to begin with, and instead waiting until you took legal action.

Read the Fine Print and Be Cooperative

If you received an offer to settle your claim with an airline or if you have been invited to an online platform to negotiate a settlement, read the fine print.

  • If you find any reference to confidentiality or non-disclosure, consider telling the airline that you are interested in settling, but you are not willing to agree to such conditions.
  • If the offer to settle is otherwise reasonable, do not simply reject it, but tell the airline that you would be willing to accept the offer if they removed the confidentiality clause.

If in doubt, consider consulting a lawyer with expertise in consumer law before agreeing to any terms or accepting any offer to settle.