Is a private settlement agreement enough or is it beneficial for a mediator to countersign a settlement agreement?
When there is an employment relationship problem, either between an employer and an employee, or between two employees, most often the parties manage to settle the dispute without formal assistance from the Employment Relations Authority. This is often achieved through negotiation between lawyers, or between the parties themselves. The Government encourages this early resolution of employment disputes by effectively mandating that parties to almost every employment dispute lodged with the Employment Relations Authority attempt to resolve their dispute at mediation first.
To this end, settlement agreements may sound like the answer to all your problems as an employer, but getting to settlement, and ensuring that you can rely on the settlement, may be trickier than you think.
It is important to be aware that an employee may be able to challenge the validity of a settlement agreement if he/she hasn’t had a reasonable opportunity to take advice before signing and therefore, if the employee wants to waive that right, that should be reflected in the terms of the agreement to protect you and your business moving forward.
There are important differences between private settlement agreements (signed only by the parties) and settlement agreements signed by a mediator employed by the Ministry of Business, Innovation and Employment (‘MBIE’), which parties to employment disputes need to consider.
While settlement agreements signed only by the parties are still binding, a settlement agreement signed by a mediator has additional clout.
In 2004, the Employment Relations Act was amended so that the mediators employed by MBIE could have the power to bind the parties to a settlement agreement in such a way that it could not be cancelled, essentially making breaches of a settlement agreement enforceable in the employment jurisdiction. The mediator contacts each of the parties to the agreement to ensure the parties are aware the settlement is final, binding and enforceable, then signs the settlement agreement.
Essentially, the effect of the mediator’s signature is to make the settlement final, binding and enforceable.
It means that no action may be commenced in respect of the terms of the settlement agreement, apart from enforcement (and penalties are available for parties who breach such a settlement agreement. The most common breaches are breaches of confidentiality provisions), so it is fair to say that settlement agreements signed by a mediator achieve greater finality. These co-signed settlement agreements may also be enforced via the Employment Relations Authority,
In short, if you get a mediator to sign a settlement agreement, it will make it harder for parties to unravel that agreement, but could also make it harder for parties to claim damages for breach of a settlement agreement.
Penalties are still available for a breach of a mediated settlement agreement, but these are restricted in quantum to up to $10,000 for individuals and $20,000 for corporations. On the other hand, if you don’t get a mediator to co-sign a settlement agreement, the agreement could be easier to unravel, but damages will be available for a breach of that settlement agreement, although any claim would need to be brought in the courts of ordinary jurisdiction.
While settlement agreements may seem like a simple end to your issues, it is worth taking the time to get them right and ensure they provide the protection you are requiring.
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.
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