What happens if someone breaches a confidentiality clause in a settlement agreement?

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Every day, all around New Zealand, employers and employees sign up to full and final Settlement Agreements which contain a clause which reads something like: “The terms of this settlement and the discussions leading up to it are to be kept confidential by both parties”.

It is generally accepted that an employee may tell their spouse about the terms of settlement but the spouse is regarded as also being bound by the employee’s obligations of confidentiality.  There is always a degree of uncertainty as to how the confidentiality requirement applies to a company, given that the breach of confidentiality will be perpetrated not by the company, but by employees who may not be aware of the negotiations, for example the pay clerk who processes the compensation for hurt feelings payment and then discloses the amount of settlement to another employee.

Claims for breaches of the confidentiality provisions of Settlement Agreements are rare but not unheard of.  There was one in 2012 in the Employment Relations Authority.

Auckland City Couriers and their former employee, Ms Priest, entered a full and final settlement agreement after a mediation between them.  The settlement agreement contained a confidentiality provision that stated that all terms of the settlement, as well as the background circumstances which led to the parties entering the agreement were to be kept confidential. 

The day after the parties signed the settlement agreement, Ms Priest spoke to an employee of Auckland City Couriers and during the discussion she disclosed that there had been a mediation the previous day.  This was a breach of the terms of the confidentiality clause. 

The courier company wanted the fact of the mediation kept confidential because it was going through a restructuring process and it didn’t want staff made aware that it had been engaged in mediation with one of the employees affected by the restructuring. The company believed that the statement that the parties had been to mediation implied that it had paid Ms Priest some money.

The company and the Employment Relations Authority both accepted that Ms Priest had not acted maliciously, but rather out of ignorance.  The courier company argued that the Authority must award a penalty against Ms Priest to ensure that confidentiality undertakings were not just a meaningless gesture.  The Authority agreed and ordered Ms Priest to pay Auckland City Couriers $1,000 as a penalty for the breach.

If you need help with settlement agreements, call Workplace Law on 09 631 5553