Reaching a settlement after a contentious dispute between an employer and employee, perhaps over the termination of their employment and allegations of discrimination, likely means settlement terms that includes confidentiality and non-disparagement clauses. These confidentiality and non-disparagement clauses live on, long after payment is made and the parties have seemingly moved on, and can carry very costly consequences. The following cases highlight just how costly it can be for employees who fail to abide by these terms.

The Importance of Confidentiality and Non-Disparagement Clauses

Settlement agreements in employment disputes frequently contain clauses requiring both confidentiality and non-disparagement. The confidentiality clause generally prohibits parties from disclosing the terms or existence of the settlement. Non-disparagement clauses go further, preventing the employee from disparaging their former employer, regardless of whether or not those comments are true. Depending on how the settlement agreement is worded, breaching these clauses can result in the employee being required to return the entire settlement payment, a heavy price for any indiscretion.

The Jan Wong Case: A Landmark Decision on Confidentiality Breach

What happened with Jan Wong, a former journalist with The Globe and Mail, after she settled a wrongful dismissal claim with her employer is a warning that there are serious consequences to breaching confidentiality and non-disparagement clauses.

Many of us will remember that Jan Wong was terminated from her job at the Globe after she took sick leave due to deteriorating mental health due to personal attacks related to her work. Her union grieved the termination and the employer’s refusal to pay sick leave, and ultimately, a settlement was reached, which included a confidentiality clause requiring Wong to not disclose the settlement terms and a non-disparagement clause preventing her from disparaging The Globe and Mail. If the terms were violated, Wong would have to return the settlement funds. The settlement resulted in Wong receiving a severance package, amounting to two years’ pay.

Four years after the 2008 settlement, Wong published a book entitled “Out of the Blue” that discussed both her mental health and her dispute with The Globe and Mail. In four separate instances in the book, she commented directly on the settlement, saying things such as, “I can’t disclose the amount of money I received,” “I’d just been paid a pile of money to go away …” “Two weeks later a big fat check landed in my account,” and “Even with a vastly swollen bank account.” The Globe pounced on this and sued for breaching the confidentiality aspects of the settlement. Wong defended on the basis that she had not disclosed the specific terms, such as the exact severance amount, and therefore had not violated the confidentiality agreement. In Jan Wong v. The Globe and Mail Inc., 2014, Justice Nordheimer, upheld the arbitrator’s decision that Wong’s disclosures were indefensible breaches of her settlement agreement. As a result, Wong was ordered to return her entire severance package of two years’ salary—a staggering penalty for a few careless words.

The L.C.C. Case: Expanding the Breach to Non-Disparagement

In L.C.C. v. M.M., 2023 HRTO 1138,  the Human Rights Tribunal of Ontario (HRTO) further expanded the understanding of how breaches of these clauses can unfold. This case involved an employee who filed a human rights complaint alleging sex discrimination against their employer. The matter was settled, with the settlement agreement containing both confidentiality and non-disparagement clauses. It also included a provision that, in the event of a breach, the employee would be required to return the settlement funds.

Despite agreeing to these terms, the employee posted on their LinkedIn profile, stating: “To all those inquiring, I have come to a resolution in my Human Rights Complaint against [the applicant corporation] and [the individual applicant] for sex discrimination.” The employer claimed that this post violated both the confidentiality and non-disparagement clauses of the settlement, and the HRTO agreed.

The employee argued that they did not breach the confidentiality clause, as they had only disclosed that the matter had been resolved, which they believed was permissible under the settlement terms. The tribunal, however, disagreed. It found that the post went beyond the permitted statement that “all matters have been resolved,” especially because the employee had mentioned the allegations of sex discrimination—a sensitive issue that had a broader public impact. Moreover, the tribunal noted that this was not a private conversation in response to an inquiry but a public post on a professional platform, which significantly widened the scope of disclosure under the confidentiality clause.

In addition to breaching the confidentiality clause, the tribunal found that the employee violated the non-disparagement clause. The employee contended that their statement was truthful and therefore could not be considered disparaging. The tribunal, however, clarified the distinction between defamation and disparagement in paragraph 44 of its decision, and non-disparagement clause prohibits more than untrue statements. It also prohibits disparaging communications. Non-disparagement prevents damaging communications whether or not they are true. While truthfulness is a defence to a claim of defamation, not so to a non-disparagement violation.

Thus, the fact that the employee’s statement was truthful did not shield them from liability under the non-disparagement clause. The employee was ordered to repay the full settlement amount—a harsh outcome resulting from a single public post.

Even without a typical Jan Wong clause, these obligations still sting

In Tremblay v. 1168531 Ontario Inc., 2012 HRTO 1939, the employee and employer, after mediation, reached a settlement that contained a standard confidentiality clause. However, during and after the mediation, the employee posted the following messages on her Facebook account:

• The first message was posted during the mediation:
  • Sitting in court now and _________ [blank in original posting] is feeding them a bunch of bull shit. I don’t care but I’m not leaving here without my money…lol.
• The next two messages were posted after the Minutes of Settlement were signed:
  • Well court is done didn’t get what I wanted but I still walked away with some…
  • Well my mother always said something is better than nothing…thank you so much saphir for coming today….

Although, unlike in Jan Wong, the confidentiality clause did not require the employee to return the settlement funds upon violating the clause, the HRTO nonetheless found the employee breached the confidentiality clause and reduced the settlement amount by $1,000 as a result, which was still a high price for posting 3 Facebook messages.

Lessons to Be Learned

These cases underscore the weight and importance of confidentiality and non-disparagement clauses in employment settlements.

Employees should be extremely cautious when signing settlement agreements that include confidentiality and non-disparagement clauses. Unlike defamation law, where truth is a defence, non-disparagement clauses can be breached even if the statements made are true. The broad scope of these clauses means that even seemingly innocent comments can lead to financial penalties. Employees should carefully review the terms of any settlement agreement, ensure they understand their obligations, and consult legal counsel if they are unsure about what they can say post-settlement.

Employees may feel like trumpeting to the world that they won a big settlement from the employer. Knowing this, confidentiality and non-disparagement clauses are inserted precisely so that employers are not faced with any reputational damage, especially where employers simply settled to avoid litigation and admit no liability. However, as these cases highlight, the dangers of not being able to keep one’s mouth shut could mean relinquishing that big win. These clauses are a powerful tool to protect an employer, and may also be the reason for a larger payout to the employee. Counsel acting for employers and employees need to be aware of the might of these clauses, and to properly advise clients of their scope and enforceability. An employee who tries to dance around the terms, even years after the fact, will know soon enough their might when they are forced to return settlement funds and possibly face other damage claims!