A reminder to chatterboxes - Confidential remains confidential 

Parties to a Record of Settlement (“ROS”) may be subject to penalties under the Employment Relations Act 2000 (“the Act”) if they breach agreed terms of settlement.

As a matter of best practice, a standard ROS for an employment relationship problem will contain a clause stating that both parties will keep the contents of the ROS, and any discussions leading to and involving the ROS, confidential.  Another standard clause in a ROS is that the parties will not speak ill of each other. These obligations were recently enforced in Southern Milk Transport Limited v Kerry Duncan [2019] NZERA 473, where the Employment Relations Authority (“ERA”) ordered the respondent to pay a penalty and costs of $4,800.00.

Mr Duncan was involved in an employment dispute that led to his termination. The employment dispute was subsequently resolved with the parties entering into a ROS. After settlement, Mr Duncan told at least one person, and possibly others, that he had ‘won’ a substantial sum in a settlement with Southern Milk. In response, Southern Milk’s lawyers contacted Mr Duncan’s lawyer advising of the breach of the ROS. Mr Duncan’s lawyer reminded him that the terms of the ROS are confidential. Despite this, one month later, Mr Duncan made public derogatory comments about Southern Milk. Consequently, Southern Milk applied to the ERA for enforcement of the ROS and penalties against Mr Duncan for breaching the confidentiality and no speaking ill provisions.

Mr Duncan was ordered to pay a penalty of  $3,000.00, of which $2,250.00 was paid to Southern Milk and the remainder paid to the ERA. Mr Duncan was also ordered to pay $1,800.00 as a contribution to Southern Milk’s legal costs.

Settlements don’t come with bragging rights

The Act gives the ERA discretion to impose a penalty on a person who breaches an agreed term of settlement in a ROS. The ERA will consider a number of elements when deciding whether to impose a penalty, including:

1.       Whether the breach was intentional or negligent;

2.       The nature and extent of the damage suffered because of the breach;

3.       Previous conduct; and

4.       Culpability.

Confidentiality clauses require a ‘common-sense’ approach, and an employer will often allow a little leeway so an employee can tell their partner or spouse the details of a settlement. However, parties should be aware of the strict confidentiality of a settlement, and the potential for penalties if this is breached.

In situations where a former employee breaches a ROS, enforcement action can be brought with penalties being imposed. In short, confidential means confidential.

If you have any questions relating to employment settlement or employment relationship problems, please contact Jaesen.