Protecting confidentiality of an agreement
Question: When a harassment complaint or discipline grievance is settled, what is the best way to protect confidentiality? Can an employee be dismissed for breaching a confidentiality clause?
Answer: When an employment dispute is settled on a without prejudice basis, the employer will usually want the settlement agreement to include a confidentiality clause. A clause of this nature will typically require the parties to keep the terms of their settlement confidential, and not to disclose them to anyone at all. Any exceptions should be spelled out specifically — such as disclosures required by law, to the employee’s professional or financial advisors, to the employee’s spouse (provided the spouse agrees to keep the terms confidential), or to the union’s executive board.
In some situations, it will be advisable to include language in the settlement agreement that requires the parties to keep the circumstances that gave rise to the dispute confidential. This will be particularly important where disputed allegations are highly sensitive in nature, or where their disclosure could damage the reputations of the parties or the business interests of the employer.
Where a settlement agreement is breached, the usual remedies for breach of contract are available — remedies to place the aggrieved party in the position it would have been in if the contract had been performed. When a confidentiality clause is breached, however, damage can be difficult to quantify.
Some settlement agreements include a provision that specifically addresses the remedy for a breach of the confidentiality clause. Provisions of this nature must be carefully drafted to be effective.
A good example of a case where a “confidentiality breach” clause was enforced is Wong v. Globe and Mail Inc. The employee’s union filed grievances arising from the termination of her employment. The grievances were referred to arbitration, and the arbitrator assisted the parties in arriving at a mediated settlement that included a without prejudice payment to the employee of $209,912. The settlement agreement contained a confidentiality clause, as well as a provision stating that if the employee was found to have breached that clause, she would have an obligation to repay the settlement funds. A few years after the agreement was signed, the employee published a book in which she referred to being “paid a pile of money to go away” and made various other similar statements. The arbitrator ruled that the employee had violated the confidentiality clause and ordered her to repay the entire $209,912. The arbitrator’s ruling was upheld by the Ontario Supreme Court on judicial review.
A provision that sets out monetary consequences for breach of a confidentiality clause will often describe the remedy as liquidated damages, representing a genuine estimate of the damages that would be suffered in the event of a breach of the clause. This language is included in an attempt to avoid having the payment characterized as a penalty, which serves to punish a party in the event of breach and may require payment of a sum that exceeds the actual damage suffered. If a remedial provision is found to be a penalty clause, it will likely not be enforceable.
The absence of language providing for specific damages if a confidentiality clause is breached does not necessarily mean the employer will be left without a remedy. In Tremblay v. 1168531 Ontario Inc., for example, the employee made various Facebook posts following the settlement of her human rights complaint, despite the existence of a confidentiality clause in the settlement agreement. One post read: “Well court is done didn’t get what I wanted but still walked away with some…” The Ontario Human Rights Tribunal determined that it was clear from the date and comments that she was referring to a monetary settlement. This amounted to a breach of the confidentiality clause. The tribunal noted the importance of confidentiality and the significance of the breach, and ordered that the amount payable to the complainant under the settlement agreement be reduced by $1,000.
Other remedies for breach of a confidentiality clause may include injunctive relief or a cease-and-desist order.
If an employee remains in employment after a settlement has been reached, and later breaches a confidentiality provision in the settlement agreement, the breach will likely represent misconduct that the employer can deal with in the same manner as any other employment infraction. Whether or not a proven breach will be sufficiently serious to justify the employee’s summary dismissal will depend on all the circumstances, including such factors as the language of the confidentiality clause, the nature and consequences of the breach, the employee’s explanation, the employee’s length of service, and disciplinary record.
For more information see:
•Wong v. Globe and Mail Inc., 2014 CarswellOnt 15512 (Ont. Div. Ct.).
•Tremblay v. 1168531 Ontario Inc., 2012 HRTO 1939 (Ont. Human Rights Trib.).
