Mate, where’s that NDA we’re supposed to be enforcing? – by Tristam Price

Archiving fail leads to former employee’s allegation of privacy breach.

In December 2020 Hamilton City Council sued its former property manager for disparagement. That employee had signed a Record of Settlement in a mediation nearly seven years earlier, in February 2014, and the RoS contained a non-disparagement clause which is quite common in these agreements.

We have reported on this previously due to the fact that the RoS being enforced was what the Limitations Act refers to as “stale” (although theoretically enforceable forever).

“Denial” clause

There was also a clause requiring that the very existence of the RoS must not be disclosed. Unsurprisingly, neither party respected this clause (even if the confidentiality of the contents was respected). For want of a better term, we intend to research the prevalence of these “Denial” clauses in RoS in an advocacy capacity.

We understand that the Employment Relations Authority (ERA) took the parties’ submissions “on the papers” as opposed to holding an investigation meeting – this usually saves time and money, yet it still cost the Council over $90,000 in legal fees as at August 2021 according to a LGOIMA (similar to OIA) request. The Chief Executive who signed off the litigation no longer works for the Council, not that it makes any difference legally.

Things went quiet for a while. Then in December 2021 the ERA advised that it required certain original documentation to progress the Council’s claim. After a desperate search, the Council conceded that said document could not be found. It probably joined a huge number of other seven year old documents in a truck similar to the one pictured above, eventually to be processed by Oji Fibre Solutions and turned into about 0.001% of a roll of corrugated cardboard or something.

The document the ERA required was the 2014 Record of Settlement.


Tears of joy

“Luckily” for HCC, on 20 January, MBIE advised that they had found a complete copy and provided it to the parties. The former employee claims that in doing so, they breached his privacy.

Soon after, ERA Member Michelle Ryan fined the former employee Allan Halse and his company Culturesafe NZ Ltd $9,000 each. Halse told [NZ Herald] he would not pay a cent of the fine.

Halse could have just refused to pay, safe in the knowledge that enforcement would be almost impossible because:

  1. HCC spent a lot of money on tenuous claims for disparagement and publicising the existence of a RoS (although not its contents). The entire penalty, legitimate or not, was awarded to the Crown. If Halse doesn’t, or can’t pay, there will be no financial incentive for HCC to enforce the penalties, and the Crown could not compel HCC to enforce at further cost to its ratepayers.

  2. Even if the penalties were paid, they would be the fruits of an alleged privacy breach by MBIE. That simply can’t happen because it would make two administrations look corrupt.

  3. When HCC filed its statement of problem it would have been aware of bankruptcy proceedings against Halse (still unresolved) and the poor prospects of collecting any penalty awarded.

The alleged breach of the Privacy Act, without which the $18,000 in fines could not have been imposed, could form the basis of a claim in the Human Rights Review Tribunal. Both MBIE and the Council could then be liable for a compensatory award.

However, Halse has made his decision to apply to the Employment Court to have the fines chucked out, and may supplement the alleged privacy breach with the doctrines of laches, and limitation.

Technicalities aside, the Employment Court is to consider that on the one hand you have an employee disparaging his former employer seven years after signing an agreement not to. On the other hand you have that employer, a public body, spending over $100,000 pursuing a 70 year old advocate for hurting its feelings, relying on a document that’s old enough to be shredded, going on to aid and abet a privacy breach by MBIE to enable a tax grab disguised as a penalty, and helping a lawyer set a legal precedent that would allow this sort of thing to happen again.

This matter is something else, and we’re looking forward to the Employment Court’s decision, which could be several months away.

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