Australia: Employee disputes: a settlement is a settlement.

We all have experienced the difficult disgruntled employee that consumes all the oxygen in the workplace and leaves HR and management with no time to get on with business. And despite no wrongdoing by the organisation, it eventually makes more sense to do a deal with the employee, end their employment and bring all the disputation to an end.

It has been said by many an Industrial Commissioner, the money spent settling such disputes is money well spent. There may be some truth to those words when considering the cost and legal expense in having to continue to manage and deal with them. Nevertheless, tensions about spending public funds when there is no wrongdoing remains a legitimate countervailing consideration.

Another factor against such "commercial" settlements is the fact that sometimes this disgruntled employee will not stop their pursuit regardless of what they are paid. They will complain and complain even after the ink has dried on the settlement terms.

A well drafted settlement document is vital. It is worth its weight in gold, as is demonstrated by these recent cases.

It's an abuse of process to bring another claim after settlement

We recently acted for the employer in Fadheel v Douglass Hanly Moir Pathology Pty Ltd [2017] FWC 3382.Ms Fadheel brought a number of proceedings against her employer, including a bullying application. After a number of conferences before the Fair Work Commission, a settlement agreement was signed by the parties in February 2017. Under the agreement, in return for her resignation, Ms Fadheel was paid a significant settlement. She accepted the payment.

"Unbelievably, the ink was hardly dry on the terms of settlement when, just 13 days later, [she] lodged [another claim]", the Commission said exasperated. As the Commission observed, "the terms of settlement could not have left the applicant (or anyone) with any doubt at all that she had agreed not to lodge or continue any claim".

Ms Fadheel brought a new claim to challenge the cessation of her employment. "Utterly appalling conduct", the Commission said, "for which [she] should be ashamed of".

In that context, the Commission found the filing of the claim after the settlement was an abuse of process. The abuse is not only in the fact that the subsequent claim is made despite the settlement, but also that the claim is made to harass, and is harassing of, the employer. The Commission ordered Ms Fadheel to pay the company's legal costs on an indemnity basis.

Undeterred, Ms Fadheel commenced proceedings in the Federal Circuit Court. The Court dismissed her claim as having no prospects of success because of the settlement agreeing to release the employer from all claims: Fadheel v Douglass Hanly Moir Pathology Pty Ltd [2017] FCCA 2659.

"I was forced to sign"

Invariably, a disgruntled (and now former) employee will assert they were forced to sign the settlement agreement or were under some special disadvantage at the time of signing. These arguments are made in an attempt to set aside the deal. This was the allegation in Valenzuela v Commonwealth Bank of Australia [2017] NSWSC 1243.

In this case, Ms Valenzuela had settled earlier proceedings following court conducted mediation. In return for a payment, Ms Valenzuela released the Bank from all matters relating to the proceedings, her employment and its cessation. So, when Ms Valenzuela brought subsequent proceedings seeking damages relating to her employment, the Bank pleaded the settlement deed in defence.

The Supreme Court observed that it would not "set aside the Deed of Release on the basis that there was some inequality of bargaining power". It is normal for mediation, and settlement discussions, to involve some stress and anxiety and disparity of positions.

Equally, the mere fact that the Bank had two lawyers at the mediation and Ms Valenzuela was self-represented may have put Ms Valenzuela at "some disadvantage" but not a special disadvantage that would justify setting aside the Deed.

Ms Valenzuela complained that in the mediation she was threatened with the prospects to pay legal costs if she lost her case. "There would in my view be nothing unusual or inappropriate in that subject matter being addressed [in mediation]", the Court said "even though that may appear intimidating"

It is not enough for an employee to assert pressure or some disadvantage as an explanation for signing a settlement document. It must be established that as an employer, you made some unconscientious use of your superior bargaining power to the detriment of an employee who suffers from some special disability or disadvantage. In this case, Ms Valenzuela was not such a person.

This was also the outcome in Fadheel. Ms Fadheel argued that if she did not accept the settlement offered by the employer then her employment would have been terminated and she would not have received any compensation without pursuing a claim. The Court said the fact Ms Fadheel "felt that she was under some pressure to enter into the [a]greement, ... does not provide a reasonable basis for concluding that the agreement might be unenforceable".

Tips for doing a deal

Any settlement will only provide peace of mind if:

  1. You keep good records of the settlement discussions, including any evidence and observations that the settlement deal is freely entered into without disability.
  2. You make sure the terms of settlement record all matters in dispute in the recitals to give full context to any release of claims.
  3. The release clause itself deals with the subject matter covered by the release by specifically identifying each matter settled along with a broad release in respect of any matters relating to the employment, any entitlements and the cessation of employment.
  4. You make the release effective immediately on signing (as the employee can sue for breach of the agreement if payment or other benefits are not provided).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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