Worker argues he agreed to higher 'ex gratia payment' during negotiations
The Fair Work Commission (FWC) recently dealt with the unfair dismissal claim of a worker who had a post-termination settlement with his employer, alleging that the latter committed a breach of their terms.
The worker, Prince Rajput, submitted an application seeking an unfair dismissal remedy against QAL Technologies Pty Ltd. The employer raised an objection to the Commission's acceptance of the case, arguing that a settlement agreement was reached, which it said should bar the worker's application.
After the worker’s dismissal, in early September 2023, the parties engaged in negotiations, primarily through email exchanges. QAL sent Rajput a letter, presented as a deed of settlement and release, outlining the terms of an offer. The letter stipulated that Rajput agreed to an "ex gratia payment" of "$30,000 gross."
The deed also stated that the said about is considered in full and final settlement of any claims he may have against QAL, releasing the company from any liabilities related to his employment and its termination.
At the conclusion of the letter, under an "Acceptance of Offer" section, it said that Rajput had read and accepted the terms.
The section also stated that the worker had the opportunity to seek legal advice before agreeing to it. Finally, Rajput electronically signed the document on 11 September 2023.
However, during the hearing before the FWC on 10 October, Rajput claimed that QAL had not followed the terms of the settlement agreement.
He said that on 18 September, he wrote to QAL and said he only received $20,700 rather than the $30,000 that was mentioned in the agreement.
QAL responded, explaining that the $30,000 was a gross amount from which tax deductions were required. Rajput insisted on receiving a net amount of $30,000, saying that he had earlier requested the removal of the words "less tax" from the draft document because he believed the payment was tax-free.
According to records, QAL said that it complied with his request and removed the said phrase from the document but gave him a deducted amount.
Rajput argued that he was entitled to a $30,000 payment, and as he had not received it, he urged the Commission to proceed with his unfair dismissal application.
Meanwhile, QAL maintained the settlement agreement effectively resolved Rajput's unfair dismissal claim, and the Commission should dismiss the application.
The company said it had met its obligations under the settlement agreement, as the payment of $30,000 was explicitly stated as a gross amount.
QAL argued that the removal of the words "less tax" from the draft settlement document did not alter the fact that tax was applicable. In contrast, Rajput said he believed an ex gratia payment was tax-exempt during negotiations.
The FWC said that “it’s clear that the parties agreed to settle Rajput’s unfair dismissal application on the basis of the payment referred to in the settlement agreement,” adding that the “dispute between the parties [was] about the meaning of the agreement.”
However, it said, “It is not the Commission’s role to supervise the performance of their contractual obligations.”
“If [the worker] believes the settlement agreement entitles him to payment of a gross amount of $30,000, he can sue for breach of contract in court. The Commission has no power to determine such a claim.”
Moreover, the Commission offered its opinion on the matter, saying that “the reference to a gross payment can only mean that tax will be deducted.”
Consequently, it found that the worker’s unfair dismissal application “cannot succeed because he agreed to settle it for a gross payment of $30,000.”
“The settlement agreement is a complete answer to his application. It cured any unfairness in his dismissal,” it added. Thus, the FWC dismissed the worker’s dismissal application.
