We are often asked, “what happens if a former employee breaches a settlement agreement; say, they breach a confidentiality or non-disparagement covenant, or an agreement not to bring a future claim against the employer?” Is there any remedy for the employer? The answer is ‘yes,’ particularly if the breach is serious, and the parties were clear about the remedy when they entered into the settlement agreement. Bottom line – don’t waste the opportunity to design the settlement you need.
An adjudicator will generally enforce a specific penalty set out in a settlement agreement if the penalty is clearly stated and not punitive, and the breach is proven.
The Human Rights Tribunal of Ontario (“HRTO”), Grievance Settlement Board, and labour arbitrators all take a similar approach when an employee (or former employee) has breached settlement terms and the employer has sought repayment of settlement amounts; the employee must fulfil its obligations under a settlement, so long as the remedy is not ‘punitive.’
Take the well-known case of former Globe and Mail columnist Jan Wong.[1] Following termination of her employment, Wong (with the assistance of her union) entered into a settlement with the Globe under which Wong received more than $200,000. Because the Globe knew Wong intended to publish a book, it insisted the settlement contain strict confidentiality language under which Wong could not “disclose the terms of this settlement.” If Wong breached the confidentiality obligation, she would be required to return the full settlement payment. Fast forward and that’s exactly what happened. An arbitrator found Wong violated the confidentiality term by writing about the settlement in her book, including “I’d just been paid a pile of money to go away” and “Two weeks later a big fat check landed in my account.” She was ordered to repay the settlement funds.
The HRTO has similarly enforced repayment of settlement amounts when the terms of a settlement agreement are clear, include agreed-to consequences for a breach, and the violation is proven.[2]
Will a court enforce an employee’s repayment obligation?
Recently, the Ontario Superior Court (Divisional Court) confirmed a former employee must repay $70,000 paid to her in settlement of a claim against her former employer.[3]
Maya Knauth was a unionized worker who went on sick leave following allegations she made of harassment and discrimination. She filed a grievance as well as an application before the HRTO. Knauth (through her union) and the employer, Independent Electricity System Operator (“IESO”), entered into a termination/settlement agreement which stated Knauth had resigned and would receive a settlement payment of $70,000. In exchange, Knauth agreed to withdraw her HRTO application and not commence or threaten to commence any legal action against IESO related to her employment. If she breached the settlement, Knauth would forthwith consent to a default judgment to repay IESO the $70,000 plus legal fees.
Fourteen years later, Knauth filed a complaint with the Ontario Labour Relations Board (“OLRB”) seeking to have the settlement set aside. As part of her claim, she alleged she did not understand the agreement when she signed it, was coerced into signing it, and was forced to resign. She claimed she was entitled to additional severance pay on top of the $70,000 which she described as “hush money.” The OLRB dismissed her application because it was not filed within a reasonable time and, even if all the allegations were accepted as true, there was no breach of the Labour Relations Act.
The IESO then successfully filed a grievance claiming Knauth violated the settlement by bringing the OLRB application. The arbitrator ordered Knauth to repay all of the settlement funds, plus the IESO’s legal fees.[4]
Knauth also applied to the HRTO to have the settlement set aside on the same grounds she raised before the OLRB. The HRTO dismissed the application, and Knauth sought judicial review of that decision by the Divisional Court, which similarly dismissed her challenge.
What does this mean for employers?
The opportunity to negotiate a settlement gives to an employer important leverage to secure the terms it considers important to protect its interests. Don’t waste this opportunity.
As with so many things, careful planning and clarity are key.
First, if, during negotiations, an employee is represented by a trade union or counsel or is given the opportunity to seek legal advice, expressly state that in the settlement agreement, as this will increase the chances an adjudicator will be willing to enforce the settlement terms.
Second, specifically define the agreement, including the limits or prohibitions on the former employee. For example, is the employee prohibited from disclosing the terms of a settlement, the amount paid under the settlement, or even the existence of the settlement itself?
Third, don’t leave the remedy up to an adjudicator. Expressly set out the consequences if the settlement is breached, including the amount to be repaid, and that an appropriate adjudicator has jurisdiction to make an order for payment.
To help you understand and meet your obligations under the AODA, or complete a compliance report, contact your Sherrard Kuzz LLP lawyer, the authors of this article, or info@sherrardkuzz.com.
The information contained in this presentation/article is provided for general information purposes only and does not constitute legal or other professional advice, nor does accessing this information create a lawyer-client relationship. This presentation/article is current as of September 2026 and applies only to Ontario, Canada, or such other laws of Canada as expressly indicated. Information about the law is checked for legal accuracy as at the date the presentation/article is prepared but may become outdated as laws or policies change. For clarification or for legal or other professional assistance please contact Sherrard Kuzz LLP.
[1] Jan Wong v The Globe and Mail Inc., 2014 ONSC 6372 (Div Ct).
[2] See our article: A Dead is a Deal. A forfeiture clause is enforceable – says Human Rights Tribunal of Ontario.
[3] Knauth v The Independent Electricity System Operator et al., 2026 ONSC 2769 (Div Ct).
[4] A grievance filed by an employer is an unusual enough scenario on its own, but one seeking an order against an individual employee (rather than a trade union) is extremely rare.
