There is a practice in the workplace, other than misconduct, operational requirements and incapacity, which ends the employment relationship. This practice is called a mutual termination agreement which is also known as a settlement agreement.
If the employer and employee agree, they can enter into a mutual termination agreement to end the employment relationship by mutual consent. This is an acceptable practice by the CCMA and the Labour Court.
Pending disciplinary action against the employee, strained employer- employee relationship due to personal relations and the pressing need to retrench, are some of the commonly encountered reasons that a settlement agreement may be entered into. A mutual termination is one of the quickest way to end the employment relationship.
When concluding a mutual termination agreement employers should adhere to certain general principles in order to avoid future repercussions. The agreement should be in written form. It should clearly state that it is in full and final settlement of all obligations between both the involved parties. It should also be signed by both parties and witnessed.
The agreement should be explained to the employee. The employer’s failure to explain to the
employee the contents of an agreement terminating the employment relationship by mutual consent, will render the agreement null and void.
In Metjielies v Stratostaff (Pty) Ltd t/a Adecco (P 294/12) 
ZALCPE 3 (27 January 2015), the ruling made it clear that an employer cannot waive his responsibility to make sure that the employee understands the agreement.
The settlement must be over and above what is due and owing to employee in terms of law. In Hodges v Urban Tasj Force Investment cc and other (2013) Labour Court, the employee was on annual leave, upon his return he noticed that certain tasks were taken over by another employee. The company entered into a mutual termination agreement on that day and gave what was due to the employee in terms of a retrenchment. The employee approached the CCMA and due to jurisdiction was referred to the Labour Court. The Labour Court concluded that because the employee did not waive the requirements which the employer must meet under the Labour Relations Act, the employee could challenge the substantive and procedural fairness of the dismissal. The employee was thus awarded compensation. It is clear from this ruling that if the employer pays only what is due in terms of the law, then that settlement agreement can be challenged.
Caution must be observed when entering into a settlement agreement. It is advisable that you acquire assistance from a trained Labour Law expert to avoid any adverse outcomes in the future.
CEO DISPUTE RESOLUTION OFFICIAL – DURBAN