Since 6 April 2016, an HCEO has been authorised to impose a fine of up to £5,000 on an employer who has not paid the full amount (including interest) due in a COT3 agreement. Enforcement proceedings concerning COT3 agreements are also included in the Register of Judgments, Injunctions and Fines (www.trustonline.org.uk), which can be consulted by the public and credit information bureaus, providing greater incentives to pay amounts due in a timely manner. However, most settlement agreements contain, by default, confidentiality clauses, whether or not confidentiality is one of the parties` main concerns. Can an employer avoid payment of a transaction if an employee violates a confidentiality clause? No, the High Court concluded in Duchy Farm Kennels vs. Steels, unless confidentiality is (actually) a condition of the agreement. The High Court heard an appeal from an appeal from the County Court, apparently the first invocation of explicit (and not implicit) confidentiality status in a work comparison (here a COT3 through ACAS). After the (ex) worker allegedly breached the confidentiality clause in COT3, the employer terminated the instalment payments due. The worker complained about his payments. The District Court held that the employer did not have the right to suspend payments, even if the worker had breached the confidentiality clause, since the confidentiality clause was not a condition of the contract. The crucial question was whether the confidentiality clause was a condition of the contract or an intermediate or unnomic condition for which an infringement did not allow the employer to cease payment. The District Court had correctly held that the „Boilerplate“ confidentiality clause in COT3 was not a contractual condition, so that an infringement would not have allowed the employer to avoid payment. The High Court stated that a confidentiality clause could be explicitly the condition of a COT3, particularly where confidentiality is the considerable benefit that the employer has obtained in the course of the settlement (instead of avoiding a legal claim), whereas the designation of the concept of „condition“ would not automatically make one.
In the event of a breach of confidentiality, the parties may also make specific provisions for damages. In a fairly normal labour dispute, there was no significant commercial risk of a breach of confidentiality, at most the risk was that other employees would assert „imitator“ rights. To regard that condition as a condition would not have led to a reasonable or desirable result, even if a condition of confidentiality is not a condition that may not be applicable at all in practice. The judgment provides useful guidance to practitioners who are trying to design confidentiality clauses in comparisons (or to pass a carriage and horses). For more information on negotiating a transaction agreement, click here. For example, if you are a shareholder, check your share contract, you may need to resell your shares after your employment relationship has ended. Settlement of labour rights can be achieved through a settlement agreement negotiated by the parties or through a simple settlement agreement relating to the advisory, conciliation and arbitration service („ACAS“), known as the „COT3“ agreement. The consequences of an employer`s breach of a COT3 are unfortunately a grey area.
There is conflicting case law on whether, after his election, the worker may bring an action for breach or terminate the contract to revive previous rights (Johnson v Communications Associates Ltd ET case no. 29768/76) or whether the only remedy is to enforce the payment obligation (Kelly v Moran Transport Ltd ET 1276/87). . . .