Question: An employee signed a settlement agreement promising not to say anything derogatory about the business or its directors. A director has discovered the employee has been badmouthing him on Facebook. What can we do?
Daniel Wilde, Partner at Harding Evans LLP answers…
A settlement agreement will typically include provisions, making any payments due under the agreement conditional upon the employee’s compliance with the terms of the agreement. It will also typically specify that if a payment has been paid and the employee breaches the terms of the agreement, the employee must repay all sums paid to him under the agreement.
A settlement agreement is a legal binding contract, the terms of which can be enforced by both parties. Much will depend on whether or not the employer has yet paid any payments due to the employee under the terms of the settlement agreement.
If the payment has not yet been paid, and the agreement provides that payment is conditional upon the employee’s compliance with the terms of the agreement, potentially the payment due from the employer to the employee, under the terms of the settlement agreement, could be withheld.
The employer’s argument is that it is a material term of the agreement that the employee must refrain from making derogatory comments and as the employee has breached the agreement prior to payment, the employer is released from its obligation to make payments due under the settlement agreement.
The employee will still have the option to sue to enforce the payment terms of the agreement, although if he has made highly derogatory comments about the director, it is unlikely that any claim will succeed. Matters will be more problematic for the employer if the derogatory comment made was of a trivial nature.
Paying back the money
If the payments due under the settlement agreement have already been paid to the employee, the employer can review whether the term of the settlement agreement includes a proviso whereby if the employee breaches the terms of the agreement, the employee is required to repay the money due. Practically, these types of clauses are difficult to enforce, as an employee would have a strong argument that this type of provision amounts to an unenforceable penalty claim rather than a genuine pre-estimate of the loss or damage suffered by the employer or its directors.
Breaching the agreement
However, a settlement agreement is a legal contract between employer and employee and if the employee has breached its terms, the employer can sue for damages. Depending on the drafting of the agreement and whether third party rights are included, the director could also sue the employee for damages for any personal losses sustained.
The practical difficulty, and one of the reasons why these types of non-derogatory provisions are rarely pursued in the courts, is that it is often difficult for the employer to quantify any losses sustained as a result of any derogatory comments being made. That said, if the employer can establish that genuine losses have been caused, a claim for damages can be pursued.
In exceptional circumstances, where the comments are highly derogatory in nature and likely to cause injury to the business, an injunction could be pursued by the employer to force the employee to delete its post.
However, it is unlikely that in most cases that the damage sustained will make pursuing a claim worthwhile as claims less than £10,000 will be dealt with through the small claims procedure. This means that an employer will be unable to recover its costs for seeking to enforce the agreement.
Reporting/removing the post
If the comment is one that is defamatory and is likely to cause serious financial and reputational damage, then in addition to forceful and immediate action against the employee, the employer may need to consider reporting the post to the operator of the site, e.g. Google/Facebook, following the normal reporting requirements. A letter to the ex-employee threatening legal action on the basis of defamation if the post is not immediately removed should also be sent.