Employer calls agreement 'binding,' rejects worker’s challenge against validity
The Employment Relations Authority (ERA) recently handled a case involving a worker who attempted to bring grievance claims against her employer after signing a settlement agreement.
The worker, employed by a kindergarten association, filed a statement of problem with the ERA in February 2024. She sought to bring grievance claims for unjustified disadvantage and unjustified dismissal, citing issues such as alleged failure to provide breaks, blocked access to workplace systems, and "repeated and unwanted behaviours" by managers.
Despite having signed a settlement agreement in October 2023, the worker argued that this agreement should not prevent her from pursuing her claims. She presented several arguments, including that the settlement document was not enforceable without a mediator's signature, that she felt pressured to sign, and that there was no genuine dispute to settle.
Dispute over the settlement agreement
The worker sought several remedies, including compensation for humiliation, loss of dignity, and injury to feelings, arrears for breaks during employment, penalties for breach of employment agreement and good faith, and costs including the filing fee.
However, the employer argued that the worker had signed a binding settlement agreement in October 2023, which settled all matters between them, regardless of whether a mediator had signed it off under section 149 of the Employment Relations Act 2000.
The worker's representative argued against the validity of the settlement agreement. These included claims that the settlement document was not enforceable because a mediator did not sign it, that the ERA could not enforce a "resignation" and prevent the worker from bringing grievances.
The representative also said that there was "no meeting of minds" due to inadequate communication from the union representative, that the worker felt pressured and coerced to sign the settlement document, and that the agreement did not settle a "dispute" and could be cancelled through misrepresentation provisions.
The employer countered that the worker was prevented from bringing claims based on the principles of "estoppel" and "accord and satisfaction". They argued it would be unconscionable for her to renege on the agreement after the employer had relied on it to their detriment.
ERA’s investigation and findings
The ERA investigated the circumstances surrounding the settlement agreement, examining communications between the parties and hearing evidence from the worker, the employer's general manager, and a casual employee involved in negotiating the settlement.
The Authority found that the settlement document arose during an ongoing investigation into allegations against the worker. The union representative had been acting on the worker's behalf, with negotiations taking place over several weeks. The employer had granted the worker five days of paid discretionary leave due to stress about the investigation.
A casual employee was appointed as an "independent investigator" and later took on a dual role when the general manager had to take bereavement leave. This casual employee became the main point of contact for the employer in communicating with the union representative.
Importantly, no evidence suggested that the casual employee was aware that the worker had not given the union representative authority to speak and negotiate on her behalf.
The Authority's decision
The ERA determined that the worker was prevented (estopped) from bringing her claims. The Authority concluded that the worker had created a belief or expectation by the employer that all matters relating to the employment relationship had been settled and that the settlement document was binding upon signing.
Furthermore, the ERA found that the employer had relied on the union representative's apparent authority to act on the worker's behalf. The fact that the worker may have remained unhappy with the terms in the settlement document was not conveyed to the employer until well after she had signed it.
Ultimately, the Authority deemed it unconscionable to allow the worker to renege on her agreement and continue the claims she had lodged.
“The outcome of this preliminary matter is that [the worker] is prevented from continuing her claims in the Authority by the settlement document she signed,” the ERA said.
This case underscores the importance of clear communication during settlement negotiations and highlights the binding nature of settlement agreements, even when not signed off by a mediator. The case further highlights the significance of properly documenting settlement terms and ensuring all parties understand their implications.
