When agreements become disagreements

Not all agreements are equal - Jennifer Mahony shares lessons from a recent Employment Relations Authority case.

An employee and employer reached a breaking point in their relationship and agreed to end it. Their settlement agreement included a confidentiality provision that neither would discuss or share the contents of the agreement, including any money paid from the employer to the employee. For many parties, they can move on without issue once they have reached an agreement.  

However, the employee in this case became convinced that his former employer had breached the agreement. Feeling caught in an unjust situation, and likely feeling powerless, the employee posted the first page of the settlement agreement on his social media account, which included details about the amount of money paid to him by his employer. This led an enforcement action and the employee paying a penalty to the Crown. 

In this case, the parties used the record of settlement process and had the settlement agreement certified. However, neither seemed to understand what that meant in practical terms. The employer wanted the agreement cancelled and the money it paid to the employee reimbursed. The employee did not seem to understand the Employment Relations Authority’s scope. Being clear on the form of agreement is crucial. For example, if there is a real concern that confidentiality may be breached and that the breach will cause significant monetary loss, a record of settlement may not be the best choice. 

While it is impossible to insure against any possible breach, there are two things that parties can do to promote understanding and lessen the possibility of breach.

First, understand what kind of agreement is best for everyone’s circumstances

When employment relationships end, most parties opt to record the agreement through either a settlement agreement or a record of settlement under section 149 of the Employment Relations Act. 

There are pros and cons to each and what you choose may be dependent on the circumstances. Many parties opt for a record of settlement, because once the agreement becomes certified, its terms cannot be revisited or cancelled.  Enforcement is through the Employment Relations Authority and Employment Court. This adds a layer of certainty and protection that many parties want. However, the Authority or Court cannot award damages nor can they cancel the agreement because of a breach. While enforcement orders can be issued and penalties assessed, penalties are typically paid to the Crown—not the other party. 

A private settlement agreement, on the other hand, operates as a contract and is enforceable via the District Court. Damages can be awarded and terms revisited, but that introduces a level of uncertainty that many parties want to avoid.

Second, future-proof the circumstances

When including a confidentiality clause in an agreement, the parties should test what that means and what the consequences are for breach. For example, questions like the following assist parties in understanding what they are intending to agree on, ensuring that they have the same expectations, and can also expose hidden issues that can cause problems later.

  • What does this confidentiality clause mean to you?  Employer, do you believe that you can share this with your senior management team?  Employee, do you believe that there is anyone with whom you could share the details of this agreement?  If so, who?  What issues do your answers create for each other?
  • What concerns do you have about the confidentiality clause (or non-disparagement, or other similar “behaviour” agreements)?
  • Are there circumstances which might make you want to breach the confidentiality of the agreement?
  • What else do you need (i.e., assurances, documents, etc.) that will lessen any concerns you have about this provision or any other part of the agreement?

Working through these kinds of questions can reveal hidden issues and expectations, which can be dealt by the parties and addressed in the agreement. This can lessen the chance of both unintentional and intentional breach, and more importantly, allow the parties to move forward with certainty and comfort. A well-understood and well-documented agreement is key to the parties’ joint power to determine their own way forward. 

About the author

Jennifer Mahony is Client Director of FairWay’s Workplace Conflict Service, which assists employers and employees to prevent, manage, resolve and learn from conflict in the workplace. She has almost 20 years’ experience as a dispute resolution practitioner and a background in employment relations.

To find out more about FairWay’s Workplace Conflict Service visit www.fairwayresolution.com, or get in touch with the team on 0800 77 44 22.