Employer must honour settlement agreement despite breach

An employer must honour payments set out in a settlement agreement with an employee even though he breached a confidentiality clause.

By Claire Davies Director

That was the decision of the High Court in a case involving Duchy Farm Kennels Ltd and Graham William Steels.

Mr Steels had brought claims against Duchy in the Employment Tribunal. A settlement agreement was negotiated in which Duchy agreed to pay Steels £15,000 by weekly instalments in settlement of the tribunal claims.

The agreement included a confidentiality clause which provided that the parties would treat the fact and terms of the agreement as strictly confidential and would not disclose them to any other person or entity apart from regulatory bodies or professional advisers.

After a few weeks, Duchy stopped paying the instalments on the basis that its obligation to do so had fallen away because Steels had breached the confidentiality clause by disclosing the amount of the settlement to a third party.

Steels denied that he had disclosed the terms of the agreement and argued that, even if he had done, it would not have been a serious enough breach of the agreement to entitle Duchy to cease making the agreed payments.

The judge found that Steels had breached the confidentiality clause, but that it constituted breach of an intermediate term rather than of a condition; therefore, Duchy was not automatically freed of its obligation to continue paying the instalments.

She further held that the breach did not repudiate the agreement and that the employer was obliged to continue the payments.

The High Court has upheld that decision. It held that the confidentiality clause was ancillary to the main part of the contract; not at the core of the agreement.

If you would like more information about the issues raised in this article or any aspect of employment law please contact Claire on 01228 585245.