Failing to abide by confidentiality provisions in a settlement agreement can cost you your settlement payment

August 28, 2019 Devry Smith Frank LLP Employee Relations, HR Policies and Procedures, Human Resources, Notice, Damages and Settlements, Payroll, Penalties and Fines, Privacy and Security, 0

The recent decision of an arbitrator in the matter between Acadia University and Acadia University Faculty Association (Re Dr. Rick Mehta), 2019 CarswellOnt 8518 (Lab Arb) [“Acadia”] emphasizes the importance of abiding by a confidentiality provision in a settlement agreement.

Background

In the spring of 2018 Dr. Mehta was terminated by Acadia University for, among other things, allegedly harassing students and other faculty members. The Acadia University Faculty Association (“AUFA”) filed a grievance on behalf of Mehta and in April 2019 the matter came before a voluntary mediation session. At the mediation, a settlement agreement was reached and the Minutes of Settlement (the “Minutes”) were voluntarily executed by Acadia University, the AUFA and Mehta.

Confidentiality provision

The Minutes contained a provision that all of the parties to the Minutes agreed “to keep the terms of [the] Minutes strictly confidential” and that if asked about particulars a party was to “indicate that the matters in dispute proceeded to mediation and were resolved, and [the parties] will confine their remarks to this statement” (Acadia at para 3).

Alleged breach of the confidentiality provision

Despite this provision, Mehta was quick to take to social media and make comments such as “I got the vindication I was seeking,” “I have left the university on my term[s] as opposed to the administration’s or union’s terms” and, in response to one of Dr. Mehta’s Twitter followers’ comments “Hope you got a nice sum monz,” Mehta’s reply that “All I will say is that I left with a big grin on my face.”

Arbitration

As a result of Mehta’s alleged breach of the confidentiality provision in the Minutes, the matter went to arbitration. The arbitrator, William Kaplan, stated that Mehta’s tweets were a clear breach of the Minutes. As a result, the university was no longer required to honour the payment provision in the Minutes and therefore Mehta essentially lost his settlement payment.

The importance of confidentiality provisions in settlement agreements

Settlement privilege refers to the common law principle that, with very few exceptions, discussions and documents surrounding a possible settlement of a matter cannot be disclosed. This encourages settlement by preventing settlement discussions from eventually being used as leverage against one of the parties if the matter proceeds through trial. The privilege also generally extends to settlement agreements themselves (see, for example, Sable Offshore Energy Inc v Ameron International Corp, 2013 SCC 37 at paras 17-18).

While Dr. Mehta’s consequences for failing to uphold the confidentiality provision of the Minutes may seem harsh, it is important to understand why settlement agreements should be kept confidential. If a settlement agreement could be freely disclosed it could result in prejudice to one or more parties to the settlement. For example, in the case of a labour dispute, such as that in Acadia, an employer may fear that if it settles a grievance and other employees become aware of the amount of the settlement, some of the other employees may be encouraged to commence grievances of their own with the goal of obtaining a similar settlement payment. This in turn could make an employer less willing to settle, which may result in more lengthy and expensive hearings.

While settlement privilege provides protection to parties to a settlement agreement, it may not cover all aspects of a settlement agreement. This is why a party to a settlement agreement should ensure that the agreement also contains confidentiality provisions, which specify the extent to which the agreement is subject to confidentiality requirements. In Mehta’s case the provision was clear that no part of the agreement was to be disclosed. One of the reasons the outcome for Dr. Mehta was so severe is because the arbitrator noted that Mehta was involved in the negotiation of the agreement and its provisions.

Importance

If you are ever involved in mediation or settlement discussions, despite the principle of settlement privilege, make sure that any agreement you reach contains confidentiality provisions to protect yourself from disclosure of the agreement and possible prejudice. If you are a party to a settlement agreement, Acadia illustrates the importance of abiding by confidentiality provisions in the agreement and demonstrates that failing to do so could result in a complete loss of your settlement payment.

By Marty Rabinovitch and Steven Huryn

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Employment and labour lawyers at Devry Smith Frank LLP

Devry Smith Frank LLP (DSF) is the largest full service law firm in Toronto outside of the downtown core. They offer a broad range of legal services to individual, business and corporate clients in most areas of corporate and personal law. Their firm’s employment law group covers a broad spectrum of HR law, including employment and labour law, occupational health & safety, human rights, workers’ compensation and much more.Lawyers at Devry Smith Frank LLP lead by Marty Rabinovitch B.A.H., LL.B. will be covering issues surrounding employment and labour law and human rights on First Reference Talks. They also provide training, seminars and conferences on the above topics. Read more .