It is generally good news if an employer and an employee are able to resolve an employment dispute and reach a settlement prior to engaging in protracted litigation. However, finalizing the details of a settlement can be a tedious process. When the parties rush through the process, or fail to properly consider the terms of the settlement, the situation can rapidly unravel and headaches ensue. A recent case before the Ontario Superior Court of Justice (PDF) illustrates this well. In this case, an employer brought a motion before the court to enforce a settlement it had reached with a former employee, where the parties fundamentally disagreed about the scope of a key term of the settlement.
Ms. Farnham was the General Manger and Executive Vice President, Pharmacy Services of Remedy Drug Store Co. Inc. ("Remedy"). On her last day of work, she deleted 13,844 emails from her inbox and 35,632 emails from her sent items. In addition, she forwarded 526 emails to her home email account. Remedy discovered Ms. Farnham's actions and commenced an action against her for breach of her employment agreement, breach of her fiduciary duties, and breach of confidence. Remedy also commenced injunction proceedings regarding the confidential information that it alleged Ms. Farnham had improperly acquired.
Before the injunction was heard, the parties attempted to settle their dispute. This was done through a series of emails exchanged between Ms. Farnham and Remedy's President, Mr. Moody. The various settlement proposals included discussions as to how the parties would capture and destroy the electronic information obtained by Ms. Farnham prior to her departure from Remedy. Ms. Farnham proposed that she would engage a third party IT consultant, at her own expense, to wipe, purge and certify that her laptop, tablet and email account were "clean of all Remedy documents". Mr. Moody responded by stating that he would only agree to use an IT firm selected by Remedy's law firm, with the work to be done at Ms. Farnham's expense. Ms. Farnham countered by stating that if Remedy's IT firm was used, she would contribute only $2,500 to the cost of the work, rather than the full amount. The email exchange between Ms. Farnham and Mr. Moody concluded on January 9, 2014 with an email from Ms. Farnham stating "we have an agreement".
The trouble arose following January 9, 2014 when the lawyers for Ms. Farnham and Mr. Moody attempted to document the settlement reached by Ms. Farnham and Mr. Moody. At that time, Mr. Moody suggested that the IT work the parties had agreed to was a "full sweep", including forensic searches to see where Ms. Farnham had sent Remedy's confidential information, so that Remedy could take steps to protect its interests. Ms. Farnham disagreed and took the position that the IT work the parties had agreed to was limited to certifying that her devices and email accounts were free of any Remedy documents. Unable to resolve dispute, Remedy brought a motion to the Ontario Superior Court of Justice seeking to enforce the settlement agreement, including a "full sweep" of Ms. Farnham's electronic devices and email accounts.
The Court's Decision
After reviewing the evidence, the Court concluded that Ms. Farnham and Mr. Moody had reached a settlement on the terms set out in the various emails that they had exchanged. The Court noted that nowhere in that exchange was there a discussion of a "full sweep" of Ms. Farnham's devices and email accounts, which Remedy submitted was part of the settlement. While this "full sweep" may well have been an accurate description of the work that Remedy's IT firm had intended on performing, those details were not documented by the parties in their email exchanges. As a result, the Court concluded that an objective reading of the email exchanges showed that the parties had only agreed to an IT review along the lines of what Ms. Farnham had originally proposed, with the modification that the work would be done by Remedy's IT firm instead of a firm selected by Ms. Farnham. As a result, the Court upheld the settlement reached by the parties, including Ms. Farnham's interpretation of the IT review.
Lessons for Employers
This case serves as a good reminder that employers and employees need to exercise care when settling disputes. One way to avoid the situation that arose in this case is to make any informal settlement or "agreement in principle" conditional upon the creation of a written document setting out the terms of settlement - in other words, the settlement will not be final until that written document is prepared and signed by the parties. In this way, any interpretative disputes can be dealt with and resolved by the parties while they are preparing the formal documentation and neither party can suggest that "the deal is done" until that documentation has been executed.