Negotiated Exits and Section 123 Agreements

Mitigating PG Risks when the employment relationship cannot continue.

As an employer, ensuring a harmonious workplace environment while adhering to applicable employment laws is crucial. At times, situations arise where the employment relationship between yourself and an employee becomes untenable, leading to the need for separation.

Negotiated exits, often facilitated through Section 123 agreements, provide an effective and proactive approach to address such scenarios while minimising potential personal grievance (PG) risks.

Today I thought I would share some more information about the concept of negotiated exits, Section 123 agreements, and how they can serve as a proactive strategy to mitigate PG risks in accordance with best practice and relevant employment legislation.

Understanding Negotiated Exits

A negotiated exit, also known as a mutual separation agreement, is a voluntary arrangement between an employer and an employee to terminate the employment relationship amicably.

These agreements are typically reached when the working relationship has deteriorated to a point where it is no longer viable or sustainable. Negotiated exits can be an effective way to prevent disputes, legal proceedings, and the potential for PG claims.

Section 123 Agreements: An Overview

Section 123 of the Employment Relations Act 2000 (ERA 2000) in New Zealand provides the legal framework for negotiated exits. This section allows for parties to agree on the terms and conditions of an employee's departure, including financial settlements, notice periods, and other relevant details. Section 123 agreements are legally binding and serve as a valuable tool for both employers and employees to navigate the complexities of separation in a controlled and mutually agreeable manner.

Key Benefits of Negotiated Exits and Section 123 Agreements

1. Avoiding Costly Litigation: One of the primary advantages of negotiated exits is that they help employers avoid expensive legal battles and potential PG claims. By proactively addressing the termination, employers can mitigate the financial risks associated with legal disputes.

2. Maintaining Reputation: Negotiated exits allow employers to maintain their reputation by handling the separation discreetly and professionally. This can be especially important in industries where public perception matters.

3. Preserving Employee Dignity: Employees leaving under negotiated exits can preserve their dignity and self-esteem, as they have a say in the terms of their departure. This can be beneficial for both parties' mental and emotional well-being.

4. Minimising Disruption: A negotiated exit minimises workplace disruption compared to a contentious termination process, ensuring a smoother transition for both remaining employees and the organization as a whole.

Best Practices for Implementing Negotiated Exits

1. Early Intervention: Wherever possible attempt to identify potential issues in the employment relationship as early as possible and consider mediation or discussions to address concerns before they escalate.

2. Open Communication: Honest and open communication between both parties is vital during the negotiation process. You should listen to your employees' concerns and work collaboratively to find mutually agreeable solutions.

3. Professional Advice: You should always seek professional advice (either legal or expert HR) before finalising Section 123 agreements to ensure that any terms agreed to are fair, legal, and in compliance with New Zealand's employment laws.

4. Confidentiality: Maintaining confidentiality throughout the process is essential to protect the privacy of both parties and avoid unnecessary reputational damage.

Negotiated exits and Section 123 agreements offer a proactive and effective strategy for mitigating PG risks.

By resolving employment disputes amicably, you can avoid the financial and reputational consequences of legal battles while preserving the dignity and well-being of all parties involved.

To ensure compliance with New Zealand's employment legislation, it is crucial to seek professional advice and follow best practices throughout the negotiation and agreement process. In doing so, you can foster a culture of fairness and professionalism within your organisation while protecting both, your interests, and reputation.

Disclaimer This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.