September 20, 2020

Volume X, Number 264

September 18, 2020

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Breach of Confidentiality Term in a COT3 Settlement Agreement

In the case of Duchy Farm Kennels v. Steels, the High Court considered whether a term of confidentiality in a COT3 settlement agreement was a condition of the agreement, in which case a former employee’s breach of that term would have entitled the employer to withhold payments due under the agreement. 

Mr. Steels entered into a settlement agreement following the termination of his employment with Duchy Farm Kennels (Duchy). Under the agreement, Mr. Steels waived all employment claims against Duchy in return for a settlement payment payable in instalments. The agreement contained a confidentiality clause which prevented Mr. Steels from disclosing anything about the agreement to anyone other than in very limited circumstances. However, it came to Duchy’s attention that Mr. Steels had mentioned the settlement agreement to a third party. At that point, Duchy stopped paying the instalments.

The High Court found that the term of confidentiality did not amount to a condition of the contract as it was not of primary importance to either party; rather, it was a generic clause often seen as a matter of course in settlement agreements. As such, Duchy had not been entitled to withhold the outstanding payments due to Mr. Steel.

The High Court noted, however, that in other cases the term of confidentiality could achieve the status of a condition, such as where the allegations in question or the identity of the parties are extremely sensitive. The High Court commented that in such a situation it was advisable for the parties to clearly state that the term of confidentiality is a condition of the agreement and make express provision for what should happen if the term of confidentiality is breached (for example, the former employee must pay back any money that has been paid out by the employer).

Evidence From Anonymous Witnesses in Dismissals

In the recent decision of Tai Tarian v. Christie, the Employment Appeal Tribunal (EAT) considered the fairness of a dismissal where the employer had relied on evidence from an anonymous witness when taking the decision to dismiss.

Mr. Christie worked for Tai Tarian (TT), a housing association. He was dismissed after a tenant made a complaint that he had made homophobic comments. During the subsequent disciplinary process, the tenant was interviewed twice as a witness but wished to remain anonymous and refused to give further evidence due to personal circumstances when asked at the appeal stage.

At first instance, the Employment Tribunal held the dismissal unfair because it found that TT had unreasonably relied on the truthfulness of the anonymous witness’s account when the witness had not been interviewed by the relevant decision-makers and had refused to provide further evidence. 

The EAT held that the Employment Tribunal was wrong and found that there was no factual basis for its conclusion that the witness’s evidence was untruthful. Additionally, the EAT found that the Employment Tribunal had erred in concluding that the witness had refused to give further evidence when she had only been asked on one occasion at appeal stage and had declined for personal reasons. The case was remitted back to a freshly constituted Employment Tribunal for rehearing. 

This case demonstrates that it is possible for an employer to rely on anonymous evidence at dismissal. However, Employment Tribunals will scrutinise the employer’s decision to rely on anonymous evidence and employers will need to consider a witness’s motivation in wishing to remain anonymous and carefully balance the wish of the witness to remain anonymous against the need for the employee to know the details of the case against them.

The ‘Last Straw’ Doctrine and Constructive Unfair Dismissal

In the case of Williams v. Alderman Davies Church in Wales Primary School the EAT considered whether the ”last straw” which triggered an employee’s decision to resign and claim constructive unfair dismissal could itself be innocuous if there was other conduct which contributed to the employee’s decision to resign capable of amounting to a fundamental breach of contract. 

Mr. Williams was a teacher at Alderman Davies Church (ADC). ADC brought disciplinary proceedings against him in relation to a data protection breach. Mr. Williams had a number of complaints and resigned upon learning that a colleague under investigation for a related data protection breach had been prohibited from contacting him, which he considered to be the “last straw.” 

At first instance, the Employment Tribunal dismissed Mr. Williams’ constructive unfair dismissal claim because it found that the “last straw” which caused Mr. Williams to resign was innocuous and reasonable. 

The EAT overturned the Employment Tribunal’s decision and found that Mr. Williams had been constructively unfairly dismissed. The EAT found that the employer’s course of conduct against Mr. Williams had been capable of amounting to a fundamental breach and, therefore, when he resigned at least partly in response to this course of conduct, his constructive dismissal claim was made. This was the case even though later conduct had ”tipped” the employee into resigning.

This decision serves as a useful reminder on the scope of the “last straw” doctrine and that employees may rely on seemingly innocuous trigger events to establish a constructive unfair dismissal claim where prior conduct on the employer’s part amounts to a fundamental breach.

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume X, Number 216


About this Author

Alex Denny Employment Attorney Faegre Drinker Biddle & Reath London, UK

Alex Denny helps companies ranging from startups to Fortune 500 businesses on all aspects of the employment relationship both in the U.K. and internationally. He has particular experience in the areas of business protection and restrictive covenants, employment issues that come up in the context of mergers and acquisitions, large scale restructuring projects across multiple jurisdictions and the management of executive terminations.

Alex’s clients come from the financial services, insurance, publishing, technology and recruitment industries. He also advises senior executives on all...

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Emma Vennesson Employment Attorney Faegre Drinker

Emma Vennesson counsels clients on national and international employment issues. She also represents them in litigation and in cross-border mergers and acquisitions. Emma has the unique perspective of having been seconded to a global software company to manage its employment-related issues across EMEA and APAC.

Employment Counseling

Emma advises employers on a wide range of matters, including:

  • Fair recruitment procedures 
  • Employment status
  • Contracts of employment and service agreements
  • Employment policies and procedures, including grievance and disciplinary procedures
  • Post-termination non-compete restrictions 
  • Discrimination and harassment
  • Effective management of staff, including dealing with poor performance and long-term absence
  • Senior executive terminations
  • Severance agreements 
  • Redundancies and business reorganizations
  • Compliance with data protection obligations, including those arising from the EU's General Data Protection Regulation

Additionally, Emma advises high net worth individuals on employment issues, including the negotiation of employment terms, remuneration packages and severance terms

+44 (0) 20 7450 4562
Charlotte Marshall Labor & Employment Attorney Faegre Drinker Biddle & Reath London, UK

Charlotte Marshall advises multinational businesses on labor and employment issues, where her experience includes corporate transactions involving multinational parties, employment-related litigation, and labor and employment laws applicable to the U.K.

Past Experience

Prior to her time with the firm, Charlotte worked as a senior solicitor with Blake Morgan LLP. In this role, she provided invaluable assistance to both employers and individuals on issues such as recruitment, family leave, termination of employment and negotiating settlements, amongst others. She also gained...

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