Australia: A real deal: An unfair dis­missal set­tle­ment goes wrong

Last Updated: 27 December 2018
Article by Michael Byrnes

We had a deal!

An employer asserts an unfair dismissal case has been settled. The Applicant contends no such settlement has taken place. How can the employer resolve the matter? 

One avenue potentially open to employers is section 399A of the Fair Work Act (FW Act) which is in the following terms:

"Dismissing applications 

  1. The FWC may, subject to subsection (2), dismiss an application for an order under Division 4 if the FWC collectively is satisfied that the applicant has unreasonably:
    1. failed to attend a conference conducted by the FWC, or a hearing held by the FWC, in relation to the application; or
    2. failed to comply with a direction or order of the FWC relating to the application; or
    3. failed to continue the application after a settlement agreement has been concluded. 
  2. The FWC may exercise its power under sub-section (1) on application by the employer.
  3. This section does not limit when the FWC may dismiss an application." (Emphasis added.)

Such an application by an employer was considered in the recent Fair Work Commission (FWC) decision in Robert Badcock v N & HM Cooper Motor Search (SA) & Car Clearance Centre (SA) T/A Motor Search [2018] FWC 6978. In this decision, Commissioner Hampton had to determine the question of whether a binding settlement had been reached to settle an unfair dismissal matter brought by the applicant, Mr Badcock.

The motor trade unfair dismissal claim goes down a long and winding road

Even before the dismissal application considered in this judgment, the case had a convoluted history. 

Some of the key events (which are relevant to the findings in the decision) were as follows:

  • The unfair dismissal application was filed by the Applicant on 4 July 2018.
  • The parties attended a standard FWC conciliation (conducted by a staff conciliator) in relation to the application on 2 August 2018. The matter was not settled at this conference.
  • Directions were then made by the FWC for hearing of jurisdictional issues on 29 August 2018.
  • Concurrent with the unfair dismissal proceedings before the FWC there was an underpayment of wages claim raised by Mr Badcock with the Fair Work Ombudsman (FWO). A telephone conciliation was conducted in that matter on 11 September 2018.
  • On 12 September 2018 the parties attended a further conciliation before a member of the FWC in the unfair dismissal matter. That conciliation did not settle the proceedings. 
  • Immediately following that conciliation, the Applicant spoke with Mr Cooper (the employer) and indicated he wished to resolve the matter. Mr Cooper responded that he would discuss the matter with his wife. He then contacted Mr Badcock on 15 September and arranged to meet with him. 
  • On 16 September 2018, Mr Cooper and Mr Badcock met informally. At that meeting it was evident both parties wanted to resolve the matter. At the previous unfair dismissal conciliation before the FWC the Applicant had offered to settle the matter for $10,000. The employer had offered $6,500.
  • At this informal meeting Mr Cooper advised he would increase the employer's offer to $8,000. There was a discussion that the settlement payment would be made on a redundancy basis and be ​"tax free".
  • At first Mr Badcock rejected the proposal but, in a somewhat dramatic twist, just as he was about to walk away he accepted this revised offer. They sealed the deal in the traditional way by shaking hands and it was agreed the settlement payment would be made within 24 hours.
  • Mr Cooper advised that he would arrange for the Motor Trade Association of South Australia (MTA) to provide paperwork to Mr Badcock. Mr Badcock responded with words to the effect ​"my word is my word".
  • On 16 September 2018 Mr Cooper directed the MTA to provide to a release agreement to Mr Badcock.
  • Later that day Mr Badcock emailed Mr Cooper setting out his understanding of the settlement that had been reached. 
  • On 17 September 2018, Mr Cooper provided the deed of release prepared by the MTA to Mr Cooper. Commissioner Hampton described it as a relatively standard but comprehensive deed that purported to release the employer from all claims arising from the employment, with the only exception being workers compensation matters. 
  • Mr Badcock considered the proposed MTA deed to be inappropriate. He referred Mr Cooper to the email in which he had set out his understanding of the settlement.
  • On 18 September 2018 the MTA, on behalf of the employer, wrote to FWC to advise that the parties had ​"reached an in-principle settlement agreement".
  • On 19 September 2018 Mr Badcock contacted Mr Cooper and indicated he was yet to be paid the settlement sum. He requested the amount to be paid and, upon receipt of that payment, he would then advise the FWC the matter had settled. Mr Cooper replied the payment had not been made because Mr Badcock had not executed the deed. 
  • On instruction from Mr Cooper, an updated deed was provided to Mr Badcock by the MTA reflecting that the time for payment was 24 hours.
  • On 19 September 2018 the directions and scheduled hearing were vacated by the FWC on the basis that the Applicant would file a Notice of Discontinuance once there had been compliance with the terms of settlement.
  • On 25 September 2018, Mr Cooper corresponded with Mr Badcock indicating that revised deed had been furnished (providing for payment within 24 hours).
  • Mr Badcock made no response to this correspondence but requested the FWC relist the unfair dismissal matter.
  • In October 2018, an underpayment of wages claim was lodged with the South Australian Employment Tribunal by Mr Badcock, seeking a payment in the order of $140,000.

The FWC Deliberations 

The employer made an application for the FWC to exercise its powers pursuant to section 399A of the Act and dismiss the proceedings. 

Commissioner Hampton had to consider whether a settlement agreement had been concluded. (Without a concluded settlement, the discretion in section 399A could not be enlivened.)

In the course of doing this Commissioner Hampton surveyed authorities relating to contractual terms including Singh v Sydney Trains [2017] FWCFB 4562 and the seminal High Court decision in Masters v Cameron [1954] HCA 72, (1954) 91 CLR 353

Commissioner Hampton held that if any agreement was made on 16 September 2018 it was not conditional upon a deed being provided and that the two versions of the deed provided by the MTA did not subsequently become the agreement between the parties.

Commissioner Hampson did, however, determine:

"I am satisfied that both parties intended to make a binding agreement and proposed restatement of the terms of settlement in a formal or more precise written form, which was not to be different in effect. That is, the payment of $8,000 paid by the respondent within 24 hours was intended to resolve the matter and enable the parties to move on. As confirmed in the evidence, details as to how the payment might be made and supplementary conditions such as confidentiality could be contained in the ​'full and more precise' form of a written confirmation; that is, in a deed reflecting the agreed terms."

Commissioner Hampton continued:

"This view is entirely consistent with the conduct of the parties including the communications made by them immediately after the meeting. Both have also (until the making of the request to relist the unfair dismissal matter) conducted themselves as having reached an agreement but with some of the ancillary detail to be confirmed."

A contention by the employer that the settlement was intended to include the underpayment claim was, however, rejected by Commissioner Hampton who, after considering the specific evidence on the matter, determined the resolution pertained only to the FWC unfair dismissal proceedings as opposed to the underpayment claim. 

In that regard Commissioner Hampton observed:

"It is common ground that the proposed scope of the settlement was not expressly discussed in the 16 September meeting and there is insufficient evidence about the earlier discussions to make any findings as to whether there was an expressed confirmation of the scope of any offers prior to meeting."

On this specific point Commissioner Hampton further observed:

"It is a reasonable objective understanding that the parties were meeting to resolve the unfair dismissal matter. Although Mr Cooper may have had a broader intention associated with his offer, as he accepted in his evidence, this was not communicated in the meeting concerned, and whilst the MTA, acting in the interests of Motor Search, drafted a broad deed of release, this was not in my view reflective of the agreement reached between Mr Cooper and Mr Badcock on 16 September 2018. Mr Badcock's email later that day actually recorded the substantive terms of the agreement made."

Commissioner Hampton found the parties had concluded an agreement. This was the first step in satisfying section 399A and having the proceedings dismissed. 

The Commissioner still needed to determine whether to exercise his discretion to dismiss the application. (The relevant provision says the FWC"may" dismiss an application in the event of a concluded settlement – it is not obliged to do so.)

On the basis of the finding that the parties had entered into an agreement to settle the unfair dismissal matter on 16 September 2018, the $8,000 settlement amount was due and payable by the employer on the agreed terms. The employer confirmed during proceedings that the payment would be made if a valid settlement was found. Given that confirmation, Commissioner Hampton found that it was ​"fair and appropriate" to exercise the discretion and dismiss the proceedings. 

Implications for Employers 

Section 399A of the FW Act provides a mechanism for concluding unfair dismissal proceedings. 

In order to convince the FWC to exercise its discretion to dismiss proceedings, an employer should be willing to provide a commitment that it will abide by the terms of the settlement upon which it relies. In the absence of such a commitment, it is (understandably) unlikely the FWC would exercise the discretion. 

As the above case illustrates, in determining these matters the FWC will closely scrutinise the facts surrounding any putative settlement. Even if an ​"informal" agreement is reached it is still prudent to record its terms so there is contemporaneous evidence of it and the problem of competing versions of events, and the concomitant confusion and uncertainty, can be eliminated or at least minimised.

Section 399A also provides grounds for an employer to seek dismissal of unfair dismissal proceedings in the case of an absent or dilatory applicant. Much like abandonment of employment, however, one missed deadline or conference is unlikely to lead to the FWC exercising a discretion to dismiss an application on this basis. 

For such an application to be successful, the employer will likely need to be able to cite a pattern or course of conduct consistent with a lax or contemptuous approach to the conduct of proceedings. 

For further information please contact:

Michael Byrnes, Partner
Phone: + 61 2 9233 5544
Email: mjb@swaab.com.au

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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