Confidentiality Clauses in High Court Case

What happens for employers when confidentiality clauses are breached?

When a confidentiality clause was breached by an employee chatting and disclosing details of their settlement agreement (which in this case was an ACAS COT3 agreement) with a colleague recently, the employer ceased payment of the rest of the agreement.  However, it was recently decided by the High Court that this was not a breach of said agreement and so the payment should continue.

It was decided in Duchy Farm Kennels Ltd (DFK ltd) v Steels, that the confidentiality clause was not a condition of the contract, had it been so any breach would automatically give the employer a right to bring its contractual obligations to an end, which DFK ltd presumed and did in this case.  The High Court however upheld the decision of a county court judge.

It was also agreed that no commercial harm or embarrassment was caused by the breach.

“There are lessons to be learnt and a warning here for employers of the risk of confidentiality clauses being breached in either ACAS COT3 or settlement agreements and employers having little recourse to stop payments due to such a breach, if confidentiality is not viewed as a fundamental condition of the agreement,” said head of employment, Susan Mayall.

“I think this case can be used to warn employers that if confidentiality is a fundamental condition of the settlement then the agreement should clearly state this and we would advise accordingly – when in doubt it is always the best policy to consult with qualified employment solicitors in these matters,” she added.

In the ACAS conciliated settlement case it was held that the employer must still pay the outstanding sum and the breach of confidentiality was not serious.

In this case the settlement between employer and employee had been negotiated with ACAS and recorded on a COT3 form. This is a legally binding agreement to settle actual or potential claims in the Employment Tribunal. Essentially, it is a form agreed following conciliation by an officer employed by ACAS (the “Advisory Conciliation and Arbitration Service”).

As well as a full and final employment settlement a confidentiality clause was included, it was agreed that the employee would not discuss the case with anyone else, nor would they disparage the employer in any way.

A sum of £15,000 was agreed in 47 weekly instalments of £330. The last payment was in March 2019 and once payment stopped the employee issued proceedings under S.19A of the Employment Tribunals Act 1996. The employer sought a declaration under S.19A (4) because of the breach of confidentiality and appealed to the High Court.

www.bailii.org/ew/cases/EWHC/QB/2020/1208.html

“In this case it was decided not only was their no commercial risk, but also that confidentiality is not is not enforceable, as it was not a condition of the agreement” added Susan.

For advice on all employment policies and tribunal claims contact the employment team on 0161 785 3500 or email enquires@pearsonlegal.co.uk

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