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Breaking Settlement Agreements

Published 19 May 2019

Nine out of ten times, a Settlement Agreement will have a non-disparagement clause. The clause will read something like;

"The Employee shall not make any disparaging comments about or otherwise disparage the Employer or any of its officers or employees. The employees of the Employer who are aware of this record of settlement shall not make disparaging comments about the Employee. The parties agree that the confidentiality of this agreement and non –disparagement extend to all forms of social media including Facebook and text messages."

What is a disparaging comment? Broadly defined as expressing the opinion that something, for relevance to this article rather someone, is of little worth - derogatory to the person. Disparaging comments can be verbal or written.

Therefore, if you have signed a settlement agreement with a non-disparagement clause, you are not allowed to say anything derogatory about any party involved in the matter. This applies not only to the employer, but also to the employee. Should either party disparage the other , it is seen as a breach in terms of section 149(4) of the Employment Relations Act 2000, which states that any person who is in breach of an agreed term of settlement, is liable to pay a penalty imposed by the Authority. 

This is exactly what happened in the matter of Stephen Duggan v Armaan Dev Enterprises Ltd [2019] NZERA 238. 

Mr Duggan and Armaan Dev Enterprises Ltd (the employer), entered into a settlement agreement after having an employment problem. The settlement agreement, containing a disparaging clause, was signed by both parties and confirmed by a mediator of the MBIE. 

Beginning November 2018, a comment was posted about Mr Duggan, by Amit Gulati, a director of the company, on Mr Gulati's Facebook page. On 8 November 2018 a friend alerted Mr Duggan to the post. Duggan went into his girlfriend's Facebook and took a screenshot of the comment. Duggan's representative called Amit Gulati, who immediately took down the comment. At that stage, the comment had been on his Facebook page for more or less 3 weeks already. 

The content of the comment wasn't made public in the decision of the ERA, but the presiding Member of Authority, Helen Doyle, was satisfied that the comment was disparaging, not towards Mr Duggan's competence, but rather directed towards his personality.  

Mr Gulati maintained throughout the proceedings that he didn't post the comment, but rather that a friend posted the comment on his page. Mr Gulati didn't call the friend to corroborate his version of the events during the proceedings and the Authority had to accept that the post was made by Gulati himself.

The company was instructed to pay a penalty of $3,000.00 as they were in breach of the signed settlement agreement. $2,250.00 of that for Mr Duggan and $750.00 for the Crown. Further, they have to pay $1,350.00 towards Mr Duggan's costs and $71.56 as reimbursement of the filing fee. Making the total payable $4,421.56.

Also worth noting that while settlements are private and confidential, Employment Relation Authority cases and decisions are not. Neither party often benefit from an ERA decision being in the public domain.