Settlement agreements, terms of settlement, deeds of release or release and undertakings are all terms which are used interchangeably to refer to the binding and confidential agreements reached between parties in good faith to resolve claims or disputes.
Employees can make any number of claims against their employer, including but not limited to:
- Unfair dismissal claims;
- General protections claims;
- Underpayment claims; and
- Discrimination claims.
These claims can be fully litigated through a court or tribunal process, with both parties preparing submissions and giving evidence to be ultimately determined by a tribunal member or judge.
Litigating a claim can be an expensive, time consuming and stressful process for all involved. For this reason, it is common for parties to recognise that it is not in their best interests for a matter to proceed to a full hearing, regardless of how certain or strong their position or legal argument is. For example, the 2016-2017 Fair Work Commission (FWC) Annual Report provides that of the 14,587 unfair dismissal applications finalised in the FWC in 2016-2017, 13,523 were resolved before they proceeded to formal hearing.
When parties agree that they do not want to proceed to a hearing, they can settle the claim on terms that suit both parties. This avoids incurring further costs and time for all involved.
Settlement agreements are usually negotiated between parties (with the assistance of their representatives) and invariably involve one party paying a sum of money to the other party in return for discontinuing or no longer pressing the claim and agreeing to terms such as keeping the settlement confidential, and not disparaging each other in future.
It is due to this exchange of money that settlement amounts are mispresented and perceived by many to be a bribe or “hush money.” In the employment context, it is sometimes alleged that a well-resourced employer can “buy” their way out of trouble. But are settlement agreements really “dirty Deeds” or are they outcomes that benefit both parties commercially, emotionally and professionally?
Firstly, there is no legal requirement for an employee to agree to settle a claim. A party to legal proceedings or in a dispute cannot be coerced, pushed or forced to take any settlement amount or agree to any settlement terms. As noted above, terms are usually negotiated with both parties having the benefit of advice from lawyers, unions and/or a tribunal.
The actual terms in a settlement agreement are also favourable for both parties. As mentioned above, terms typically included are mutual obligations not to disparage (that is, both parties agree not to criticise the other) and a release from claims (that is, both parties agree not to pursue claims against the other).
In addition, settlement agreements are entered into on a confidential basis where each party agrees to keep the terms of the agreement to themselves. For employees, this can be particularly significant. If a dispute is heard by a tribunal or court the outcome will be publicly available in published decisions that are searchable on the internet and may be reported in the media. In this sense, taking a matter to a hearing not only risks an adverse finding but also risks the employee’s reputation.
A settlement agreement, on the other hand, is only between the employer and the employee. If the employee works in a particularly small industry, the confidentiality afforded by a settlement agreement could shut down the risk of reputational damage and damage to future career prospects. Equally, for employers, a confidential agreement can prevent any reputational damage or loss of good will which may arise if an adverse court or tribunal decision is published.
While signing a settlement agreement usually signals that the matter is at an end, there are times where an employee does not act in good faith and may breach the terms of the agreement. In this situation, the terms of the settlement agreement can be enforced in the courts.
Take for example, the saga between Seven West Media and a former employee that was played out in the New South Wales Supreme Court and in the media. Seven West Media commenced legal proceedings against the former employee who allegedly breached the confidentiality provisions of a Deed of Release by making statements to the media about her employment and personal relationship with the Chief Executive Officer. The Court granted orders that the former employee not give interviews or make statements to the media or on social media and also ordered the former employee to pay Seven West Media’s legal costs for the proceedings.
Notwithstanding the Court Orders and the Deed of Release, the former employee again made statements to the media and via Twitter. Just earlier this month, the NSW Supreme Court held that the former employee breached the orders on multiple occasions and found her to be in contempt of court.
So, those who use the term ‘hush money’ are using an emotive term to misleading the public about the true nature of a mutually agreed resolution to a particular matter. Sadly, it is often the media that does this to sensationalise a story for ratings or as ‘click bait’. It is even worse when it is lawyers, who know better and who are bound by professional and ethical standards, use the term ‘hush money’ as a way to gain sympathy for their clients.
The reality is that sensationalising these matters inevitably leads to long lasting emotional, brand and reputational damage for all parties involved.
Settlement agreements are a practical way to end a contested matter on mutually agreed terms and provide assurance to both parties that the matter has now ended forever with binding protections for each party.
Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.