Original article by Howard Levitt, published in the Financial Post on August 1, 2019.
I recently had a client ask that I review her severance package. She was expected to continue working for a few months and then receive a payout, which I viewed as providing far too little compensation in light of her age, 30 years of service, management position and remuneration. As result, we began negotiations with her employer for an increased package.
Within a couple of weeks, the employee was told that the company was considering firing her for just cause, and not paying her a penny. It had learned that she had informed one of her colleagues about the severance package.
The offer was marked “Confidential” and stated that the employee was not to discuss it with anyone except her legal and financial advisers. That is standard language, designed to prevent employees from comparing offers and using that information to leverage higher severance packages.
The employee did not consider the implications of sharing her offer with a trusted colleague, who in turn believed he was helping her when he attempted to obtain a higher offer from the company on her behalf.
We were able to salvage the potential problem due to her long service and the willingness of the company to forgive this error. But the breach turned a straightforward negotiation into the quantum of severance into a lawsuit about whether severance had to be paid at all.
This demonstrates the high price that employees may be forced to pay for disregarding warnings of confidentiality during their employment or following termination.
This issue may have occurred in part because employees read warnings about confidentiality in many employment contexts, such as lengthy and boring language when they accept employment or in a settlement offer during or after the threat of litigation.
Employees may be tempted to ignore such warnings, or skim through them, only partially understanding or believing that, as long as the company doesn’t find out, there is no harm in a little chatter here and there.
However as many employees have learned, the information intended to be kept confidential may have a high monetary or commercial value to the company and, if it believes such information has been leaked, it may sue the employee, costing tens of thousands of dollars in legal fees to defend, even if the matter comes to nothing. Where a breach of confidentiality is actually proved, the employee may be liable for hundreds of thousands of dollars in damages, not including their legal fees to defend the case.
There is also the situation in which severance settlements include a confidentiality agreement requiring repayment of the severance if breached. The Globe and Mail successfully sued former reporter and columnist Jan Wong for just such a breach.
In a related case, I was consulted by a sales employee who sent copies of confidential client materials to his personal email address to print at his home office to work in the evening.
Although this can always be problematic depending on the sensitivity of the materials and the inherent risk of disclosure through unsecured personal email servers, it was exacerbated because the employee had provided his employer with notice of resignation only days before – advising that he was joining a competitor. The employer’s regret at losing the employee, particularly to a competitor, turned to rage when it discovered this. It believed him to be stockpiling confidential client materials for use at the competitor.
The company called the employee’s new employer, told them the employee had copied confidential information and threatened to sue the new employer for encouraging and/or inducing this behaviour.
Whether believing the company or simply not wanting to risk a lawsuit, the new employer pre-emptively withdrew its offer, leaving the employee, without a job and with a reputation in tatters. Neither employer would provide a reference, the former believing he had attempted to steal confidential information and the latter being unable to say anything about his work since he was fired before he started.
- Carefully read and ensure you understand the confidentiality terms of anything you sign. If you don’t understand them, ask for clarification from legal counsel.
- Beware of sharing information that is related to any employment offer, severance offer or settlement offer.
- Beware of sharing or even copying company information, particularly when leaving your employer
- If you are accused of breaching confidentiality, contact counsel.