Employers frequently insert confidentiality provisions into termination and settlement agreements to prevent others from learning the details of the arrangement or other sensitive information about the company. And once an employee signs such an agreement, you may think that’s the last you’ll hear of it.
But a recent U.S. Supreme Court decision shows that nothing is absolute when it comes to keeping former employees from talking. Even with a well-written settlement or severance agreement signed by the employee, situations arise in which the person can still disclose the settlement terms, the circumstances leading up to it and other information you may have wanted to keep quiet.
Nevertheless, you can take some important steps to give yourself as much protection as possible.
Worker Testifies Against Employer
The Supreme Court case involved Ronald Elwell, a long-term General Motors employee. Elwell worked in GM’s Engineering Analysis Group, which studied the performance of vehicles that were the subject of product liability lawsuits. As part of his job, Elwell frequently defended the safety of GM products in court.
Eventually, however, Elwell’s relationship with GM soured. He was fired after testifying in a lawsuit that a faulty fuel tank may have caused a GM truck to burst into flames after a collision. He sued the automaker for wrongful termination, and GM turned around and sued Elwell for disclosing confidential company information.
Confidentiality Agreement Signed
Elwell and GM ended up settling their cases against each other. Elwell received an undisclosed amount of money, and he promised not to testify against GM in any lawsuit involving the company’s products unless ordered to do so by a court.
Meanwhile, a lawsuit had been filed against GM in another state by two brothers who claimed their mother was killed after the Chevrolet truck she was riding in caught fire following an accident. The brothers called Elwell as a witness in the case.
GM tried to block Elwell from testifying by pointing to the provisions in the settlement agreement that forbade him from disclosing company information. But to GM’s consternation, the confidentiality agreement didn’t hold up.
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Court Allows Testimony
The Supreme Court ruled that a settlement agreement approved in one state cannot limit the evidence that can be introduced in a lawsuit filed in another state. The brothers who sued over their mother’s death had no say in the agreement reached in the case between Elwell and GM. Therefore the court concluded Elwell could not be prevented from testifying in the brothers’ case against the company.
How To Make Agreements Work
Although, as this case illustrates, confidentiality agreements with employees are not ironclad guarantees of silence, nevertheless they can provide some protection. In most cases, you can insist as a condition of the settlement that former workers agree not to voluntarily disclose any information about their termination, the terms of their settlement or facts which might support claims by others.
This may reduce the likelihood that other workers in your organization will hear about what happened, and perhaps see how generous you were and try to negotiate a similar deal. It may also deter the settling employee from reporting your employment practices to a government agency.
To gain the most benefit from a confidential settlement, it’s important to follow some basic advice:
- Have reasonable expectations. Though it’s tough to police what former employees say, confidentiality agreements can have important psychological value and go a long way toward discouraging employees from talking.
For added leverage, you can include a provision requiring employees who breach the agreement to return any money they received. However, you may not be able to prohibit someone from testifying in court in response to a valid subpoena or from providing information requested by a government agency such as the Equal Employment Opportunity Commission.
- Include a notice provision. Harold M. Brody, a partner with the Los Angeles law firm of Proskauer Rose, recommends including a provision requiring that the employee give you reasonable advance notice if a person, court or government agency asks the worker to provide information covered by the agreement. Specify the name and address of a company lawyer or high-ranking person in your organization for the employee to contact. That way, you’ll have a chance to assert your interest in keeping the matter confidential-before it’s too late.
- Prevent negative comments. Have the employee agree not to publicly or privately make disparaging or defamatory remarks about the company, its employees or its products.