Can an employer avoid paying a transaction when an employee violates a confidentiality clause? No, according to the High Court in Duchy Farm Kennels/Steels, unless confidentiality is (effectively) a condition of the agreement. The High Court heard a complaint from the County Court, apparently the first complaint regarding the status of an explicit (rather than implied) notion of confidentiality in an employment comparison (here a COT3 on ACAS). After the (former) employee allegedly breached the confidentiality clause in COT3, the employer suspended the payments in installments due. The employee complained about his payments. The Landgericht found that the employer had no right to suspend payments, even if the worker had violated the confidentiality clause, as the confidentiality clause was not a contractual condition. The crucial question was whether the confidentiality clause was a condition of the contract or an intermediate clause or appointment for which an offence would not give the employer the right to stop the payment. The Landgericht had correctly held that the confidentiality clause contained in COT3 was not a contractual condition, so that an infringement would not have allowed the employer to avoid payment. The High Court found that a confidentiality clause could be explicitly imposed on a COT3, particularly where confidentiality was the essential benefit the employer obtained in the transaction (rather than avoiding a judicial right), whereas marking the concept of "condition" would not automatically be a condition. The parties could also make special damages provisions in the event of a breach of confidentiality. There was no significant commercial risk of breach of confidentiality in a fairly usual labour dispute, at most the potential risk was that other workers would assert "copycat" rights. To regard this clause as a condition would not have resulted in a reasonable or desirable result, even if a confidentiality clause is not a condition, it cannot be applicable at all in practice. The judgment provides useful guidance to practitioners who want to establish conservation clauses in comparisons (or browse a coach and horses).
In the absence of an agreement on COT3, the application of a transaction agreement involves asserting a new right and taking legal action against the transaction agreement itself. The High Court judge indicated that it is possible for employers to avoid this type of situation by explicitly stating that confidentiality is a condition of the agreement or by specifying in the agreement that there will be consequences (which may not treat the agreement as having been denounced) for a party that violates confidentiality. He filed a lawsuit against his former employer (duchy). The parties entered into a transaction negotiated through Acas and registered on the cot3 form. Under COT3, the duchy agreed to pay $15,500 in installments in full and final compensation for S`s debt, and both parties agreed to keep the facts and terms of the agreement strictly confidential. It is possible for the contracting parties to explicitly declare that a clause is a condition (it would be permissible to breach the contract and claim damages), which was not done here. There may well be cases where a confidentiality clause in a COT3 or transaction contract could be large enough to obtain conditional status, but in most cases of this type, the agreement will explicitly state that the clause is a condition.