Employers reminded about confidentiality provisions, The Law Times (January 25, 2015, p.7)

Employers reminded about confidentiality provisions, The Law Times (January 25, 2015, p.7)

By Nikolay Y. Chsherbinin

Labour and employment cases are a regular testing ground for confidentiality provisions in binding settlement agreements, with the goal typically to foster an environment for negotiation conducive to reaching a settlement or to create a broader protection against disclosure. The Divisional Court’s judgment in Wong v. Globe & Mail is a glaring example of the consequences of a breach.

In Wong, the court upheld the arbitrator’s decision compelling Jan Wong to repay the full amount of the settlement, $209,912, for breaching the confidentiality provision by disclosing in her book that she had received a “big fat cheque” for settling her employment litigation with the Globe.

Wong had served as a Globe journalist for 21 years. In September 2006, she wrote an article about the assassination of a student at Dawson College in Montreal. The article subjected her to personal attacks in various forums, which triggered the onset of a severe depression that seriously undermined her mental health. From October 2006 to May 2008, Wong was largely off work due to her disability. In May 2008, the Globe asserted she was neither sick nor unable to work and requested her to return to work under the pain of dismissal. She refused and the company dismissed her.

As a consequence, the union launched a grievance for unpaid sick leave and wrongful termination. With the assistance of the arbitrator, the parties reached a settlement. The Globe agreed to pay Wong a lump sum representing the amount she would have gotten during her sick leave and as well as a second payment representing two years’ pay of $209,912.

The Globe’s awareness of Wong’s intention to write a book about her experience of suffering from depression in the workplace prompted it to insert a specific confidentiality provision in the settlement agreement. The parties agreed “not to disclose the terms of this settlement” and, if Wong disclosed them, she “will have an obligation to pay back . . . all payments paid.”

In May 2012, Wong published her book in which she disclosed the Globe had paid her a settlement. “I can’t disclose the amount of money I received,” she wrote at one point. “I’d just been paid a pile of money to go away,” she also noted.

In response, the Globe immediately applied to the arbitrator, who remained seized of the matter, for an order that Wong forfeit and repay $209,912 for breaching the confidentiality provision. Having concluded she had disclosed a term of the settlement and thus breached the confidentiality provision, the arbitrator ordered Wong to repay $209,912.

Wong applied to judicially review the arbitrator’s decision.

The central issue in her application for judicial review was whether she had standing to bring it. In essence, she argued the union had failed to fairly represent her and, as such, her case fell within three exceptional situations, articulated in Yee v. Trent University, in which an individual may have standing to pursue judicial review. She reinforced her position by arguing that she, alongside the union, had signed the settlement agreement and that it was she who was liable for the repayment of $209,912. Having found that the union’s representation wasn’t deficient, the court refused Wong’s argument about standing. It clarified that despite the very serious financial consequences for her, the impact of the ruling wasn’t the deciding factor on the issue of standing.

The court went on to consider, among others, Wong’s argument that she hadn’t breached the settlement agreement because she understood she could speak about the terms of the settlement as long as she didn’t reveal the actual amounts paid.

I pause to remind that in Dumbrell v. Regional Group of Companies Inc., the Ontario Court of Appeal made it clear that a party’s subjective understanding as to the meaning of a contract wasn’t admissible for the purpose of interpreting it. Having found Wong’s argument to be “an indefensible one,” the court observed that in her book, she expressly referred to the “size” of the payment through characterizations such as “a big fat cheque,” “paid a pile of money,” and “a vastly swollen bank account.”

The court went on to point out that the one thing the Globe wanted from this settlement was confidentiality. It paid for it but didn’t get it. In its view, the confidentiality provision was clear and unambiguous. Given that the second lump sum was a term of the settlement, the court found the arbitrator’s conclusion was reasonable and dismissed the judicial review.

Before assessing the practical impact of Wong, we should pause to consider whether the court’s reasoning applies to all settlement agreements in Ontario. Even if a confidentiality provision seems airtight, it must still be reasonable and the disclosure must still be proven. In Wong, both the arbitrator and the court deemed the clause to be reasonable because the parties reached the settlement agreement “after much back and forth between the parties” and “numerous changes were made to the proposed terms” that ultimately permitted Wong to disparage the Globe after approximately 11 months.

In Tremblay v. 1168531 Ontario Inc., the Human Rights Tribunal of Ontario found that the employee had breached the confidentiality provision by disclosing on her Facebook page that there was a settlement and that she received monetary compensation. The tribunal observed that a contravention of settlement undermines the administration of justice by discrediting the human rights system and generating disincentives to negotiation. In finding that an award of monetary compensation could bolster both the private and public importance of complying with settlement terms, the tribunal reduced the amount owning to the former employee under the settlement by $1,000.

Wong and Tremblay are examples of rare cases where employees publicly commented on their settlement terms. They serve to educate employees that arbitrators, judges, and adjudicators are unanimous in their view that parties must respect negotiated confidentiality provisions.

Nevertheless, in most cases proving a breach of a settlement term remains to be a legal challenge for employers. The lesson that emerges is that they must not only insert a well-crafted confidentiality clause into the settlement agreement, they must fortify it with the forfeiture provision in case of an unauthorized disclosure.

It’s helpful to keep in mind that there’s a distinction between a penalty and a forfeiture provision. The former involves a payment of money stipulated as in terrorem of the offending party; the latter represents the loss of something, often money, held as a security for the enforcement of an obligation.

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