By Howard Levitt

Woman who posted about resolution of rights complaint ordered to pay back funds for breaching non-disclosure

When employers resolve employment cases, often the settlement is mostly about confidentiality. They do not want the sometimes embarrassing details — or even the fact of the lawsuit — publicized. This is particularly so since many employment lawyers go out of their way to put into their statements of claim embarrassing facts about the company, founded or not, in order to leverage a better settlement. Unfortunately, there are minimal or no consequences for making such often false allegations. Employers do not want the public, customers, suppliers, or other employees, to pile on or become concerned by these same allegations. And successful litigation encourages others employees to reject the first offer that employer makes to them.

Increasingly common therefore are non-disparagement and confidentiality clauses in standard release and settlement agreements. These clauses usually restrict disclosure to direct family members, financial and legal advisors, who themselves are to be bound by the same confidentiality restrictions.

In a recent human rights tribunal decision, LCC versus MM, the parties agreed to just such a confidentiality and non-disparagement provision in the settlement agreement, and also intelligently added that if either was breached, the employee would have to return the settlement proceeds. The agreement added that if any inquiries were made of the employee, she would simply state that all matters are resolved without any reference to any monies being paid — nothing more. The parties also agreed that no comment would be made by the employee that could reduce the view held of the employer by anyone, including on social media.

During the course of the case, the employee posted on LinkedIn, that she had filed a claim for sex discrimination against this employer. After the settlement, she replaced it with “to all those Inquiring, I have come to a resolution of my human right complaint against my employer for sex discrimination.” The employer learned of this after a year and demanded it be taken down. About a month and a half after the employer moved to recover the monies paid in the settlement, the employee finally removed her post.

The human rights tribunal looked at the Bhasin decision of the Supreme Court of Canada, which found that, in carrying out any contract, each party must have appropriate regard to the legitimate contractual interests of the opposing party.

The tribunal noted: “The context of the Settlement Agreement is a contract meant to bring a legal matter of a sensitive nature to a private and discrete close. In light of the consideration given by the corporation to avoid the reputational damage to the corporation, such damage was realistically foreseeable by the publicizing of details of that nature.”

It went on: “A breach of the confidentiality provision in a settlement is a significant breach of the agreement. Confidentiality can be important to all parties in resolving disputes. If these provisions are routinely ignored by applicants there may be a disincentive for respondents to settle human rights applications. Along with confidentiality clauses, non-disparagement clauses are an important part of many settlements and in cases such as this one, part of what the paying party paid for.”

As a result, the tribunal ordered the employee to pay back all the money she had been paid.

The tribunal was correct. Much of what employers pay for in many settlements is not so much the wrongful dismissal damages, but confidentiality. I have represented employees who have literally obtained millions of dollars more to keep the secrets they unearthed away from the public’s glare and relatively little for the dismissal itself.

The Ontario government is presently considering legislation to prohibit such non-disclosure agreements (NDA). They say that they are doing this in the interest of women. On the contrary, it is in the interest of women to be able to sue for large amounts, and retain those large amounts, when the employer has acted badly. These are not amounts which a court would award. They are amounts which the employer pays so they are not publicly embarrassed, and have difficulty recruiting other women. Women would be the primary victims if such NDA agreements were prohibited.