What happens when an employee breaches a settlement agreement?
General / 25 March 2017
Employment relationship problems are commonly resolved by confidential settlement negotiations, resulting in a full and final settlement being agreed between the parties. The terms of the settlement can be captured in a Record of Settlement, signed off by a Ministry of Business, Innovation and Employment mediator, pursuant to s149 of the Employment Relations Act 2000 (ERA).
Settlements agreed this way are final, binding, non reviewable, and enforceable as though they had been determined by the Employment Relations Authority. Settlement terms commonly include confidentiality and “non disparagement” clauses, which may be enforced by way of compliance order and penalty for breach.
A recent decision by the Employment Relations Authority (Authority) related to the breach of such a term in a settlement agreed between an employee, Brooke Woodrow, and her ex-employer, the Wanaka Sun, a free local paper.
Here, the parties had agreed to not make derogatory comments about each other to another person or organisation. However, after the settlement was signed and certified by a Mediator, Wanaka Sun was informed that Ms Woodrow had made derogatory comments about them at her new place of work. Another former employee of Wanaka Sun advised that Ms Woodrow had referred to her previous employer as a “f*ckwit” and said that “Wanaka Sun was a stressful place to work”.
Wanaka Sun raised a claim against Ms Woodrow for breach of this settlement term, and the Authority determined that it was unlikely that Ms Woodrow had used the alleged inappropriate language about her former employer, but held that she had made the comment about it being a stressful place to work. The Authority determined that this comment fell within the definition of “derogatory”, as negative inferences could be drawn from that comment.
Ms Woodrow had therefore, breached a term of the settlement agreement. The Authority then had to determine what penalty if any should be imposed on Ms Woodrow for this breach.
The maximum penalty which could be awarded against Ms Woodrow as an individual was $10,000, but the Authority determined that as the breach was of a very mild character and there was no discernible harm suffered by Wanaka Sun, the appropriate penalty was set at $250.00. Ms Woodrow was also ordered to pay the Wanaka Sun $71.56, which was the cost of filing the matter with the Authority.
What impact could this decision have on you?
Before signing any settlement agreement, it is imperative that the parties understand its terms and the effect of these, including being sure what is expected in terms of confidentiality and what can and can’t be said about it or the relationship problem it resolves.
This case highlights that a relatively minor comment to another individual can amount to a breach of the settlement agreement and could result in legal action, even where the harm is negligible.
If you would like to know more about what your risks and obligations are in relation to any settlement, or would like to discuss bringing a claim in respect of breach of settlement, please contact us.
Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.