Confidentiality in Employment Settlements

It is typical in most settlements of employment disputes for the employer to request, and the employee to agree, to provide a confidentiality provision with respect to the settlement.

Typically these clauses prohibit the employee from disclosing the details of the settlement to any third party (spouse, financial and legal advisors excepted).

Some clauses stipulate that the fact that the matter settled may be disclosed but nothing else.

Other clauses contain an explicit penalty provision that permits a clawback or forfeiture of settlement funds if a breach.

The rationale for these clauses is quite simple.  An employer in resolving a dispute has an interest in ensuring that a settlement of a dispute does not create a “shark effect” of future claimants coming forward with the mistaken notion that the employer will settle any dispute.  In most respects, it is the confidentiality clause that the employer is paying for as much as avoiding the time and cost of a trial.  A trial would be a public proceeding whereas a settlement affords the employer the opportunity to control disclosure.

The Toronto Star recently reported on the decision of a Labour Relations Arbitrator  that found that an employee should forfeit the financial remedy received on a successful grievance on account of the employee’s breach of the confidentiality provision.

Interestingly, the employee in question did not sign the settlement agreement or the confidentiality provision.  The grievance having been handled by the employee’s union and as is apparent from the article against the desires of the employee to have an airing of the grievance in a hearing.

We encounter many employee clients who, whether on account of emotion or bad feelings, actually would prefer to have a public airing of their issues with the employer in court for the world to witness, rather than a strictly monetary resolution of the claim.

Similarly, we encounter may employees who are part of a bargaining unit/union, and find that the union is not representing their interests in the way in which they may have expected.

We strive to meet the client’s objectives in any employment matter, however, it is our duty to properly inform the client on what reasonable objectives are attainable from the outset.  Conducting a trial or hearing simply for the purpose of broadcasting a complaint to the public ignores the fact that our civil court system is designed primarily to grant monetary remedies for wrongs.  Clients seeking publicity are best to achieve this objective through the media, rather than a costly and less than ideal court process.

Confidentiality provisions, properly negotiated, and agreed to by the parties are enforceable, and should be treated as such following conclusion of the settlement.

D. Jared Brown – Lead Counsel

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