Loose Lips Sink Ships – Repayment Obligation

The benefit of restrictive covenants, such as a non-disclosure provision in a settlement agreement, was recently underscored in the Ontario Superior Court decision of Wong v. Globe and Mail.

To briefly recount the facts, Jan Wong had been employed by the Globe and Mail for 21 years prior to her termination.  She was on and off work for months at a time due to depression. The employer ordered her return to work, despite Wong contending that she was unable to work.  When the applicant did not return to work as directed, her employment was terminated.

As a consequence of the termination, grievances were filed. The parties settled the grievances pursuant a Memorandum of Agreement (the “MOA”) whereby the Globe and Mail agreed to pay the applicant a lump sum representing sick leave entitlements and two years’ salary in the amount of $209,912.00.

The MOA also contained provisions regarding confidentiality and non-disparagement, and the related consequences of any breach of those provisions by Ms. Wong:

Should the Grievor breach the obligations set out in paragraphs 5 and 6 above, Arbitrator Davie shall remain seized to determine if there is a breach and, if she so finds, the Grievor will have an obligation to pay back to the Employer all payments paid to the Grievor…

Subsequent to the MOA, Ms. Wong wrote and published a book entitled “Out of the Blue” about her experience with depression in the workplace. In response, the employer sought a determination that twenty-three phrases of the book breached the MOA’s confidentiality provision and an order that the applicant forfeit and repay the settlement funds. The employer’s application was successful as Ms. Wong was found to have breached the confidentiality provision of the MOA. As a consequence of that breach, an arbitrator had ordered Ms. Wong to repay the settlement funds.

Ms. Wong applied for judicial review. The Court provided an analysis of the merits of the case even though it concluded that Ms. Wong did not have standing to bring the application for judicial review as she was a unionized employee. The Court applied the standard of reasonableness to the arbitrator’s decision on whether there was a breach of the MOA. It disagreed with Ms. Wong’s submission that she did not breach the MOA because she understood that she could speak about the terms of the settlement as long as she did not reveal the actual amounts paid on the following grounds:

• Generally speaking, evidence of the subjective understanding of the parties as to the meaning of a contract is not admissible for purposes of interpreting the document.

• The confidentiality provision was clear and unambiguous that the “terms of the settlement” could not be disclosed.

The judge dismissed the employee’s application for judicial review, and ordered her to pay costs of $15,000 to each of the union and the employer.

For employers, the disclosure of the terms of settlement has ample consequences in the case of future employee termination but also, exposure to the scrutiny of the public. This decision serves as a reminder that non-disclosure provisions in settlement agreements are important. Essentially, when the agreement is unambiguous and is executed with informed consent, without any apprehensions as to the capacity of the parties, a non-disclosure provision can serve to protect important business interests.