Confidentiality clauses can be worth more than the paper they’re written on
Confidentiality regarding the terms of the settlement of a legal dispute is a key consideration for many parties. Most accept that the fact that a settlement has been reached will likely become known, yet still do not want the details of the settlement to be known. Some parties want a confidential settlement to discourage potential claims from other parties in the future. Others may also want to avoid the perception of liability or wrongdoing that could be created by disclosure of the details of the settlement, including the amounts being paid, finding insufficient comfort in the obligatory “no admission of liability clause”.
Thousands of legal disputes are resolved without a hearing. It is not known with certainty how many cases are settled as opposed to how many are adjudicated by a tribunal, but various estimates indicate that at least 90% of legal disputes are resolved privately by the parties. It is also safe to assume that the majority of settlement agreements contain some form of a confidentiality clause. But how effective are they?
There are a number of reported cases regarding the validity of confidentiality clauses and the available remedies in the event of a breach, including a recent arbitration case in the world of academia.
One better known case on the enforceability of confidentiality clauses is Wong v. The Globe and Mail Inc., 2014 ONSC 6372, a 2014 decision by the Ontario Superior Court. Ms. Wong had been a journalist at The Globe and Mail for over 20 years. She was directed to return to work from a lengthy medical leave, The Globe and Mail disputing her assertions that she remained medically disabled from working. Wong’s employment was terminated and she, through her union, grieved.
A settlement was reached following mediation and its terms put in writing in a settlement agreement. It provided for the payment of significant sums to be paid to Wong for unpaid sick leave in addition to two years of salary.
It was known that Wong was working on a book regarding her experiences of dealing with depression in the workplace. The settlement agreement therefore included confidentiality and non-disparagement provisions, and indicated that the arbitrator who had been mandated to hear the grievance would retain authority to consider the matter in the event of a need to determine whether Wong was in breach of the provisions. If the arbitrator was to rule that a breach had occurred, the agreement stated that Wong would have to repay the lump sum received for the two years of salary.
Wong completed and published her book and The Globe and Mail immediately brought an application for the arbitrator to determine if a number of sections in the book violated the confidentiality provisions. Following a hearing, the arbitrator concluded that some of the sections in Wong’s book did breach the settlement agreement and, accordingly, ordered Wong to repay the amount received representing two years of salary.
On judicial review, the Ontario Superior Court upheld the arbitrator’s decision and rejected Wong’s argument that she understood that she was only prohibited from disclosing the actual amounts paid under the settlement and could therefore disclose all other terms. The Court ruled that Wong’s subjective understanding of what the agreement meant was not admissible in light of a comprehensive settlement, negotiated over a long period of time, drafted in clear, unambiguous and objective language. The Court also rejected Wong’s argument that the repayment provision should nonetheless be set aside as an “oppressively punitive forfeiture provision”. The Court highlighted that the settlement agreement did not require Wong to repay all of the money she had received, as she would keep the amount received for unpaid sick leave. The Court found that the repayment provision was reasonable to enforce the requirement that Wong maintain confidentiality. While in the end a breach occurred, the provision, when drafted, reasonably offered the employer greater insurance that Wong would honour her obligation of confidentiality although it could not guarantee it.
The Court’s decision in this case highlights key elements that favour the enforceability of confidentiality clauses in settlement agreements, clear and unambiguous language being one. The decision also suggests that setting out the consequences for a breach of the confidentiality clause serves to highlight the relative importance that maintaining confidentiality has to the party who sought that term. However, Wong’s failed argument of an oppressive penalty should not be viewed as impossible to make out in all cases. The consequences for breach should be serious, yet may in some circumstances cross a line into punitive territory.
The absence of specific consequences in the event a confidentiality clause is breached is not fatal to its enforceability, but makes available remedies subject to the discretion of the arbitrator or the court. For example, Tremblay v. 1168531 Ontario Inc., 2012 HRTO 1939 (CanLII), the Human Rights Tribunal of Ontario reduced the amount a complainant was to receive under a settlement agreement by $1,000 after finding that the confidentiality provision had been breached via her Facebook posts. While the tribunal recognized that a breach of confidentiality is impossible to fully remedy, since it is impossible to reinstate confidentiality once breached, it declined the employer’s request that it not be required to pay the full amount of the settlement. The tribunal maintained as much confidentiality as possible by not disclosing the original amount of settlement in its decision. Therefore, it is difficult to assess whether the reduction of the amount was, in those circumstances, a severe consequence.
The recent case of Acadia University v. Acadia University Faculty Association, 2019 CanLII 47957 (ON LA) shows that tribunals may exercise their discretion to impose very severe consequences for breaches of confidentiality terms in a settlement agreement even if the agreement is silent on consequences for breaches. In this case, the Acadia University Faculty Association (“Association”) filed grievances contesting Acadia University’s (“University”) termination of a tenured professor. The grievances were referred to arbitration and dates were scheduled for a hearing. However, a voluntary mediation prior to the hearing resulted in a full and final settlement of the dispute. The parties executed Minutes of Settlement (“Minutes”) confirming the negotiated terms of settlement, including the following language:
- The grievance was resolved “without any admission of liability or culpability by any of the parties”;
- The parties agreed “to keep the terms of these Minutes strictly confidential except as required by law or to receive legal or financial advice”; and
- “If asked, the parties will indicate that the matters in dispute proceeded to mediation and were resolved, and they will confine their remarks to this statement. Stated somewhat differently, it is an absolute condition of these Minutes that no terms of these Minutes will be publicly disclosed”.
Within days of the settlement, the professor took to Twitter and tweeted that he was a “vindicated former professor”. One of his followers tweeted back congratulating the professor and expressing his hope that he had received a “nice sum”, to which the professor responded that all he would say was that he had “left with a big grin on [his] face.”
A few days later, the professor tweeted again that he had been vindicated and had left the University on his terms and not those of the University or the Association. His tweet referenced that he had been required to sign a Non-Disclosure Agreement “by law” but that it was not for his protection.
Upon becoming aware of these tweets, the Association’s legal counsel contacted the professor and advised him to immediately take them down. The professor did not follow the advice.
The University and the Association then convened a hearing before the arbitrator. Prior to the hearing, the matter proceeded to an interim conference call hearing and the arbitrator issued a direction that the professor immediately delete from his Twitter account the above discussed tweets and to strictly comply with confidentiality terms.
Following the issue of the direction, the professor further tweeted accusing the University of attacking his “rights to academic freedom & dissent” and alleging that he had been dismissed without cause for exercising those rights. Other tweets made reference to “severance pay”. While the professor apparently deleted some of his prior tweets, his tweet referencing “severance pay” remained and he also wrote a letter to the University’s president threatening to release the Minutes to the media unless his conditions were met.
In his written decision following the hearing, the arbitrator concluded that the tweets not only breached the confidentiality provisions in the Minutes, but were also “wildly inaccurate” and “untrue”. The arbitrator concluded that the Minutes “were categorical that there was no admission of liability or culpability by any of the parties” and that no basis existed from the Minutes to claim vindication, or that the termination resulted from the exercise of academic freedom and was without cause or that the professor was owed severance pay. The arbitrator pointed out that “none of these issues were ever determined one way or the other” but that what was clear was that the parties had “agreed to say nothing about the contents of the Minutes other than that the matters in dispute were resolved” and had promised to limit their remarks about the matter to that statement.
The arbitrator further ruled that, in light of the multiple and repeated breaches of the confidentiality provisions, the University was no longer required to honour its payment provisions to the professor, thereby giving teeth to confidentiality clauses that did not specify consequences for breaches. The arbitrator’s decision should prove useful in arguing for the non-payment of all settlement funds as an appropriate remedy, for breach of confidentiality provisions explicitly recognizing that “settlements in labour law are sacrosanct”.
The cases discussed above reaffirm the importance of confidentiality in the settlement of legal disputes and the willingness of tribunals and courts to enforce those obligations. Of course, circumstances may be such that a breach has occurred but the aggrieved party lacks sufficient evidence to prove the breach and obtain redress. Not all parties to a confidentiality agreement publish books or take to social media.
Nonetheless, confidentiality agreements are crucial in most settlements. To strengthen their effectiveness, parties should consider including a provision setting out the consequences for a breach that will serve as a reasonable deterrent and also a clear enforcement mechanism.
Having the party consenting to a confidentiality agreement obtain independent legal advice (or advice from his or her union) also serves to demonstrate that the party understands the terms of the settlement, including the importance of maintaining confidentiality.
Finally, consideration should be given to specifying what might be said publicly about a legal dispute and its resolution, especially if the dispute has already received some public attention. For example, the parties might agree that they are at liberty to say that the parties have found a mutually satisfactory resolution, which may alleviate the feeling of a party being completely muzzled, while refraining from disclosing any information that would be construed as an acknowledgment of liability or wrongdoing.
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