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CONFIDENTIALITY CLAUSE - NOT EASY TO SUE

In almost every Minutes of Settlement or Release signed by the parties to resolve civil litigation, there is something called a confidentiality clause. This is especially so in the case of deals made to resolve wrongful dismissal suits. They usually look something like this:
 
“The parties agree that they shall keep the terms and fact of this settlement completely confidential. The employee agrees that he/she will not disclose the fact or terms of the settlement except with his/her spouse, legal or financial advisors or as required by law.”
 
It is almost always the employer that requires this clause to be included in the Minutes of Settlement. Employers don’t want other employees to know how much their colleague got. They are afraid that they could give existing employees the wrong idea about how much money they might get if they are fired without just cause. Non-profit organizations and government employers do not want to read headlines in their local paper scrutinizing and criticizing the money they spent to get rid of an employee.
 
The strange thing is, despite the fact that these confidentiality clauses are found in almost every set of documentation that resolves an employee’s lawsuit, I have not heard of one case in Canada where someone has tried, never mind succeeded, in suing because the confidentiality clause was breached. There are two reasons for this.
 
The first is that unless the employee is actually quoted by the media revealing the terms of the settlement, it is almost always impossible to prove that they leaked the details. The same applies if it is the employer who is alleged to have spread the news.
 
More importantly, lawsuits, for the most part, are about money. You have to prove damages. If there is no harm, there is no foul.
 
Even if an employer could prove that an employee gabbed about the details of the settlement, they would have to prove to a judge that the breach of the contract somehow did them harm. This task is almost impossible. Arguing that because other employees now know how much you paid to their old colleague in severance may  affect future settlements is likely a waste of time. The judge will tell the employer that if a year down the road a terminated employee is demanding the same settlement their old co-worker got, they should just say no. They should pay out what is required by law and if the employee doesn’t like it, they can sue.
 
The prospect of an employee suing an employer for breaching a confidentiality clause is even more unlikely.
 
First of all, it will have been the employer that requested the clause, not the employee. If they weren’t the ones who asked for it in the first place, what possible harm could be done to the employee because their old boss breached the confidentiality clause? Even if the employee was the one who asked for the confidentiality clause, they still have to prove they have been harmed in some way. “So?”, says the judge.  “There was a newspaper article that revealed the terms of your severance package. How were you hurt?” If the employee’s severance package was a healthy one, it could not be said that they were embarrassed by the publicity. The media attention will simply have vindicated them as an employee who was done wrong.
 
Notwithstanding the fact that successfully suing the breach of a confidentiality clause is a near impossibility, we employment lawyers will continue to include them in settlement documents. Old habits die hard.
 
As published in the Hamilton Spectator, September 7, 2004
 
Ed Canning
Ed Canning
P: 905.572.5809
ecanning@rossmcbride.com