Confidentiality clauses are common in settlement agreements between employers and employees. Two recent decisions illustrate the possible consequences – for employers and employees – of breaching such clauses.
The first case involved a breach by an employee1. The employee had filed a human rights complaint, and the parties reached an agreement at mediation. The mediation agreement and the settlement agreement the parties signed both contained a standard confidentiality clause.
During and after the mediation, the employee posted messages on Facebook about the mediation and the settlement. While her postings did not spell out the amount the employer had agreed to pay her, they disclosed that a settlement had been reached. The employee also posted derogatory comments about the employer's representatives at the mediation session. The next day, when the employer found out about the postings, it refused to pay the settlement money.
The employee brought a motion before the Ontario human Rights Tribunal to enforce the settlement. She sought an additional $5000.00 in damages to compensate for the delay in payment.
The Tribunal concluded that the employee had breached the confidentiality clause in the settlement agreement with her Facebook postings. Notwithstanding the breach, the Tribunal ordered the employer to honour the terms of the agreement. The Tribunal however, reduced the employer's required payment by $1000.00.
The second case involved a breach of a confidentiality clause by the employer in a settlement involving a unionized employee2. The settlement included a provision that a portion of the settlement monies would be characterized as general damages and would, therefore, be non-taxable. After the settlement, an employee in the employer's accounting department raised a concern about the non-taxable nature of that portion of the settlement. He then (with the knowledge of the HR department who knew about the terms of the settlement) consulted the Canada Revenue Agency and was advised that the money was taxable. On the strength of this advice, the employer deducted tax from the amount the parties had agreed to characterize as general damages.
An arbitrator issued an award ordering the employer to pay the full amount under the agreement. The union and the grievor then advanced a separate claim against the employer for damages for breach of the confidentiality provision of the agreement. The arbitrator concluded that the employer's disclosure of the terms of settlement to CRA had breached the confidentiality clause. The arbitrator was not convinced by the employer's argument that the standard language authorizing disclosure "when legally required to do so" applied to the disclosure to the CRA. The arbitrator ordered the employer to pay $1000.00 to the employee and another $1000.00 to the union as damages for its breach of the confidentiality clause.
The lesson from these cases is that a breach of a confidentiality clause in a settlement agreement will not typically justify the innocent party being able to resile from the entire agreement, but it will warrant a small "fine" payable to that party.
1Tremblay v. 1168531 Ontario Inc., 2012 HRTO 1939.
2Green Grove Foods Corp v United Food and Commercial Workers Canada, Local 175, 2012 CanLII 51867 (ON LA) (per Paul Craven)
