How to ensure Employers are covered when signing a full and final settlement or mutual termination agreement.
A settlement or mutual termination agreement is a contractual agreement where parties agree to terminate the employment relationship. This contractual agreement is neither a dismissal nor a resignation. This agreement is mutually consented to as a recourse to end the employment relationship amicably.
The agreement may be entered at any time during the employment relationship and is commonly used when the employment relationship has irretrievably been broken down. This avenue benefits the Employer and Employee parties and can avoid lengthy, tedious, and sometimes costly labour disputes.
In essence, the agreement terminates the employment relationship. It is final in nature, and once it is entered, the Employee waives their right to refer the matter to The Commission for Conciliation, Mediation and Arbitration (CCMA) or any other Bargaining Council with jurisdiction. An Employee may not refer this matter to any statutory body after this contractual agreement is entered into as the agreed settlement is full and final.
In the matter of Barkhuizen v Napier  ZACC 5; 2007 (5) SA 323 (CC), the Court was tasked with establishing whether entering into a mutual termination agreement or settlement is against public policy. The Court stated that it is vital for parties to be encouraged to settle disputes amongst themselves on terms that they mutually agree to. Waiving one’s right to recourse after entering this agreement is lawful and not against public policy. It is paramount to note that this is a consensual agreement with benefits to both parties.
Despite this, a party would often refer a dispute after signing an internal full and final settlement. What can an Employer do in such a scenario?
The Employer will argue that there was no dismissal and that the CCMA or Bargaining Council has no jurisdiction to entertain the dispute. Evidence presented must prove that the Applicant understood the agreement and that the conditions and implications thereof were communicated to the Applicant in a language that the Applicant understands. The Employer must also present evidence that the agreement was entered voluntarily and not under duress. Witnesses present at the time may testify regarding the agreement and confirm that both parties understood the terms.
An Employer may safeguard themselves against statutory body council referrals from Applicants on the same set of facts if they enter into clear and specific settlement agreements or mutual termination agreements. It should be made clear that the Employee waives their right to recourse because of the parties’ contractual agreement. There should also be a clear and concise breakdown of the settlement amount. The agreement must be reduced to writing and signed by both parties, including witnesses.
Article By: Cass-Leigh Oranje
Dispute Resolution Official – CEO Gqeberha