Confidentiality Clause has Teeth: Police Officer forced to Return Settlement Funds

Confidentiality clauses are routinely inserted into settlement agreements when employers resolve legal disputes with workers.  We are often asked by clients what would the consequences would be to an employee who breached the confidentiality clause of a settlement agreement.  A recent arbitration case shows that arbitrators (and potentially other decision makers) will take a very hard line on employees who deliberately breach their obligations.

The case involved a police officer who was represented by a union.  The union entered into a settlement with the officer’s employer of a grievance related to the entitlement to a premium under the collective agreement.  The officer did not sign the agreement himself as the union is the party responsible for bringing forward the grievance on the officer’s behalf.  The settlement agreement included the following general language related to confidentiality:

This agreement is strictly confidential and without prejudice or precedent to any other matters.

After the settlement was completed, the officer posted a document on the “Employee Bulletin Board” which set out the details of the settlement.  The settlement details were posted while the officer was campaigning to be elected president of the union.  The employer took the position the officer breached the confidentiality clause.  The union argued that the officer was not bound by the confidentiality clause because he did not sign it and that the confidentiality clause did not spell out any penalty for breaching it.

The arbitrator categorically rejected the union’s arguments.  The arbitrator found that individual workers are bound by the consequences of settlements entered into on their behalf by unions.  Further, the arbitrator agreed with earlier decisions which held that confidentiality clauses must be treated as “iron clad” and “…worthy of the parties’ continued confidence.” The arbitrator required the officer to return all of the funds which were paid to him.

The arbitrator noted that the worker’s actions were premeditated and were done for the purpose of benefitting himself in the context of the union election.  The arbitrator noted that requiring the funds to be returned would act as deterrent for others who may be tempted to ignore confidentiality clauses.

This decision is a positive development for employers as it clearly establishes that fairly general confidentiality language is enforceable even where the grievor does not sign the settlement agreement.  It should give some comfort to employers that arbitrators appreciate that there is a value to confidentiality provisions and that deliberate breaches by workers will not be tolerated.

It should be noted that not every breach of a confidentiality agreement will necessarily result in the return of the settlement funds.  In situations where a worker “inadvertently” breaches the confidentiality agreement the funds may not have to be returned.  In situations where confidentiality is particularly important to the employer, it is prudent to negotiate a specific consequence for breaches of confidentiality.

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