How sacrosanct are confidentiality clauses? When can the corporate veil be lifted for greater transparency and accountability? Leading employment law expert Barbara Buckett had a thing or two to say on the matter.
RNZ recently approached Barbara for comment on the issue of whether Dunedin City Counsellors were justified in seeking greater transparency and accountability concerning a perceived severance pay-out to the outgoing Chief Executive of Council-owned lines company Delta Utilities Services. The RNZ segment aired Monday morning and can be listened to here.
You may recall Stuff.co.nz released an article last month concerning outgoing Chief Executive Grady Cameron’s pay-out from a Dunedin City Council owned power company. The payment is being commonly perceived as a severance payment and referred to as the “million-dollar golden handshake”.
Mr Cameron and the Lines Company came under fire last year after a whistle-blower alleged the company’s power poles were rotting, neglected and dangerous. The allegation resulted in the instigation of a WorkSafe audit.
Although the Council could see the value of the payment Mr Cameron received, it was not able to view the details of what that sum comprised of, and in particular whether it comprised of any performance related component. The company itself resisted attempts from the Mayor/City Council to obtain this detail, citing a confidentiality clause in the Chief Executive’s contract.
The Mayor complained the company’s citing of a confidentiality clause as the basis for withhold the information was “ridiculous” given the City Council technically wholly owns and controls the company. The question of whether the Council could lift the corporate veil to provide the requested information, and therefore obtain the transparency and accountability it was after, was put to leading employment lawyer Barbara Buckett.
Barbara’s thoughts on the matter were that: There are competing interests here. If it is settled under the Employment Relations Act as a section 149 Settlement Agreement (and/or if there existed a confidentiality clause in the Chief Executive’s contract), it should be treated with the upmost confidentiality (i.e. the corporate veil maintained) until and unless Mr Cameron expressly agrees to waive that confidentiality.
This issue highlights the importance of businesses having relevant policies in place and well-worded employment contracts. This issue of transparency could have been avoided altogether if the Council owned lines company had in place a policy (and/or a provision in the employment agreement) requiring its senior leadership to provide detail to the City Council, and obtain the Council’s sign off, prior to agreeing to any severance payment or high-level employment agreement.
If you or your business could be affected by the issues contained within this article and in particular whether you need advice concerning confidentiality, employment contracts, organisation policies and/or settlement agreements, get in touch with BuckettLaw right away.
(To view the full Stuff.co.nz article referred to above, click here)
This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for specific professional advice on any matter and should not be relied upon for that purpose. You should always seek professional advice before taking any action in relation to the matters addressed.