• What Happens When Employees Breach Confidential Settlements? A Labour Arbitrator and the Human Rights Tribunal Weigh In
  • July 11, 2013 | Author: Anne-Marie Naccarato
  • Law Firm: Cassels Brock & Blackwell LLP - Toronto Office
  • Nearly every employee settlement, whether before or after a claim starts, contains a confidentiality provision preventing the employee from disclosing the terms. Two recent decisions provide some guidance for what can happen when the terms are disclosed and confidentiality is breached.

    The Arbitration Decision

    In Globe and Mail v. Communications, Energy and Paperworkers Union of Canada, Local 87-M, Southern Ontario Media Guild (Jan Wong Grievance) (“Wong”) the employer and the union negotiated a settlement of Wong’s termination from employment. The negotiations took place over a three month period. It was a specific term of the settlement that Wong could not disclose any term of the settlement (except to legal or financial advisors, family, and the disability benefit provider) and if she did so, she would be required to repay the full monetary amount of the settlement.

    Four years after the settlement was concluded, Wong published a book which contained numerous statements that alluded to a payout. The arbitrator ruled that four of those statements breached the settlement, namely: “I can’t disclose the amount of money I received,”; “I’d just been paid a pile of money to go away,”; “Two weeks later a big fat check landed in my account,”; and “Even with a vastly swollen bank account...” The arbitrator ruled that by disclosing that she received a payment, Wong had disclosed a term of the settlement and therefore breached the settlement agreement.

    The arbitrator dismissed Wong’s argument that she believed she was only prevented from disclosing the value of the payment, ruling “Responsibility for that rests with her.” The arbitrator ruled that, as per the terms of the settlement, Wong was required to repay the full amount of the settlement. In coming to this conclusion, the arbitrator examined the context of the negotiations and was persuaded by the fact that the parties, including Wong, were experienced and sophisticated and understood the terms of the settlement. Wong had months to negotiate and consider the terms and had access to her union and legal counsel throughout. There was no inequality of bargaining power. Further, the repayment term was not unconscionable since Wong herself clearly heralded the settlement as a victory in her book. By Wong’s publication of her book, the employer had “forever lost” the benefit of confidentiality for which it had bargained, a key term that was made clear to Wong throughout the negotiations.

    The HRTO Decision

    In late 2012, the Human Rights Tribunal of Ontario (“the HRTO”) ruled on a similar matter. In Tremblay v. 1168531 Ontario Inc. (“Tremblay”), Tremblay and her former employer mediated a settlement of Tremblay’s claim which included signing confidential Minutes of Settlement. Unbeknownst to the employer, during the actual mediation, Tremblay posted the following Facebook status update from her phone:

    Sitting in court now and -------- is feeding them a bunch of bullsh*t. I don't care but I'm not leaving here without my money...lol.

    Immediately following the mediation:

    Well court is done didn't get what I wanted but I still walked away with some.”

    And a few hours later:

    Well my mother always said something is better than nothing...thank you so much saphir for coming today....

    The employer refused to pay the settlement on the basis that Tremblay had breached the confidentiality of the agreement. Tremblay brought a claim to the HRTO to enforce the settlement, claiming that she did not breach because, like Wong, she had not disclosed the value of the settlement.

    The HRTO ruled that both parties breached the settlement; the employer for not paying, and Tremblay for breaching confidentiality. Similar to the Wong decision, the fact that Tremblay did not disclose the value did not matter; her Facebook posts made it clear that money was paid which was a term of the settlement.

    By way of remedy, the HRTO noted that it is important to give “real meaning” to confidentiality provisions so that parties will adhere to them. A remedy should reflect the circumstances of the case and the severity of the breach. In this case, the HRTO ordered the employer to pay the amount of the settlement but reduced the amount by $1,000 in recognition of Tremblay’s breach.

    Practical Implications for Employers

    The outcomes of these decisions were highly dependent on the facts in each case and it should not be assumed that the employer will recover the full amount of the settlement in every case. In Wong, the protracted negotiations between sophisticated parties with independent legal advice made Wong’s position that she thought she was only prevented from disclosing the value of the settlement untenable. In Tremblay, Tremblay’s blatant disregard for confidentiality, the settlement, and the mediation process itself warranted censure. Both decisions indicate that an employee’s breach of confidentiality can impact the settlement, but that the size of the impact depends on the context. To protect itself against future breaches of settlement agreements, the employer should ensure that:

    • the employee has been given the opportunity to seek independent legal advice;

    • it is made clear to the employee that confidentiality is a significant term of settlement, without which no settlement can occur;

    • the settlement clearly states to whom the employee can disclose the terms (usually immediate family, legal, and financial advisors); and

    • for large settlements, it considers whether to include repayment language if the employee discloses any term of the settlement.