Where parties to an employment relationship have resolved a dispute outside of the Employment Relations Authority (Authority) or Employment Court (Court), the details of any agreement reached between them is usually recorded in a record of settlement pursuant to section 149 of the Employment Relations Act 2000 (Act) (Record of Settlement).
A Record of Settlement can be short and simple, or long and complex. The effectiveness of the Record of Settlement depends on how practical the resolution is and whether what is recorded in the Record of Settlement actually reflects the parties’ agreement.
We often receive questions about the process of signing and receiving certification of Record of Settlements and about standard clauses contained in them.
Over the next few weeks, we will be putting out a series of articles to address these questions. This article will briefly outline the standard clauses included in a Record of Settlement and what happens once the Record of Settlement is signed. Future articles will discuss specific clauses, such as non-disparagement and confidentiality, and the process for enforcing a Record of Settlement.
Key Standard Clauses
Key clauses typically included in a Record of Settlement include:[1]
- a specified notice period and an agreed finishing date;
- if a period or payment in addition to the contractual period of notice is being made, this is specified;
- a payment for lost future earnings for a specified period (to recognise the time required to find a new job);
- if a dispute or personal grievance has been raised and there is a basis for acknowledging humiliation etc, a payment of compensation under s 123(1)(c)(i) of the ERA – these payments are often referred to as being made “without deduction” to reflect their non-taxable nature;
- any contractual entitlement the parties wish to confirm in writing, such as a bonus, long-service payment, or accrued annual leave, particularly if the employer is agreeing to pay an entitlement that has not yet fully accrued;
- a contribution towards any legal fees reasonably incurred – for audit purposes, evidence of the fees incurred will be required (for example, an invoice);
- a mutual non-disparagement clause, stating that neither party will speak ill of the other;
- a confidentiality clause; and
- confirmation that the agreement is a full and final settlement of all claims arising out of the employment and its termination.
What happens once a Record of Settlement is Signed?
After a Record of Settlement has been signed by both parties, it is sent to Employment Mediation Services to be certified by a mediator.
The mediator will contact (usually by phone) each party independently to explain the effect of the mediator’s certification. Specifically, the effect of the mediator’s certification is that:
- the terms of the Record of Settlement will be final and binding on and enforceable by the parties;
- the terms of the Record of Settlement may not be cancelled under the provisions of the Contract and Commercial Law Act 2017; and
- except for the purposes of enforcing the Record of Settlement under the Act, the parties cannot bring the employment matters covered by or the terms agreed to under the Record of Settlement before the Authority or the Court in any way.
The Act also restricts a mediator from certifying a Record of Settlement that includes terms agreeing to forgo all or part of a party’s entitlements to money payable under:
- the Minimum Wage Act 1983;
- the Holidays Act 2003;
- the Home and Community Support (Payment for Travel Between Clients) Settlement Act 2016;
- the Support Workers (Pay Equity) Settlements Act 2017; or
- the Fair Pay Agreements Act 2022.
Once the mediator is satisfied the parties understand the impact of the Record of Settlement and certifies this, each party is bound to fulfil their obligations under the Record of Settlement. If one party does not do so, the other may apply to the Authority for enforcement action.
In our experience, there are usually no issues in obtaining the mediator’s certification. It is in both parties’ best interests to facilitate this to occur as efficiently as possible.
If you have any questions about this article, or need assistance with anything employment-related, please don’t hesitate to be in touch with the Employment Team.
[1] Selected from Office of the Auditor General New Zealand “Severance Payments: A Guide for the Public Sector” (June 2019) at [2.22].
