A Settlement Agreement is a legal document which is used to formalise an agreement between an employer and an employee who are involved in a dispute. Parties are within their right to seek legal advice before signing a Settlement Agreement to ensure it is fair and legal.
Benefits of a Settlement Agreement
A benefit of a Settlement Agreement is that it is often less stressful, quicker, and cheaper compared to resolving a dispute through court proceedings. Each party are provided the opportunity and freedom to express their view on the dispute and negotiate the terms in order for both parties to leave satisfied. This is compared to a court proceeding where the dispute will likely end in a win-lose scenario, leaving one party dissatisfied.
When a Settlement Agreement is done right, the document can release an employer and an employee from future dealings with each other without there being ‘bad blood’ between the parties. It may allow ex-employees to easily secure employment in the near future as the dispute is resolved amicably.
It is possible that when a Settlement Agreement is both negotiated and prepared well, it can protect an employer from unfair dismissal claims. This is because the purpose of the Settlement Agreement is for both parties to decide upon terms that both parties can reach agreement on. When an employee is able to express what concerns them with their employer and can be involved in reaching what is viewed as a fair settlement, the employee is far less likely to pursue further claims against the employer in the future. Terms in the Settlement Agreement would be included to prevent the employee from taking further legal action such as an unfair dismissal claim.
If the employee were to pursue legal action against the employer, where terms in the Settlement Agreement prevent this from occurring, those actions would likely not proceed with the relevant body. It would also be a breach of the agreement terms and the employer would be entitled to begin legal proceedings to recover damages sustained as a result of the breach.
When to use a Settlement Agreement
There are multiple situations where a Settlement Agreement might be the best way to resolve a dispute or a potential dispute. These may include:
- Employment ending due to redundancy
- Employment ending due through dismissal and
- An ex-employee disputing the reason for their employment ending after their employment has ended.
Whatever the reason is, when an employee is presented with a Settlement Agreement, it is important that they clearly understand the terms of the agreement and the effect those terms will have upon them once the agreement is signed.
If an employee is to be paid out as part of the Settlement Agreement, it is important to specify the exact amount the employee will receive from the employer (for example, state the exact monetary value rather than the number of weeks’ pay).
Recommended Provisions
The following are some recommended provisions for a Settlement Agreement:
- Payment: The employee will be paid a lump sum equalling to a certain amount to be received within a period. Upon receiving the payment, the employee will discontinue matters relating to the dispute.
- Release: Upon payment being received, the employee will give up their right to sue the employer or make a claim against them at the Fair Work Commission. This will not affect the employee’s right to make a claim for matters unrelated to the Settlement Agreement.
- Confidentiality: The employee will agree to maintain confidentiality of the employer’s private information to any third party. This provision cannot restrict the sharing or use of general information. Details of the settlement are also required to be kept confidential by the employee.
- Non-Derogation: This is where the parties agree to not bring each other into disrepute or denigrate each other.
A Settlement Agreement may also include a Statement of Service provision. A Statement of Service is a document provided to the departing employee which contains details about their employment with the company. This may be an extra benefit negotiated between the parties to part amicably. A letter of reference may also be negotiated to assist the employee with future employment.
How can Business Chamber Queensland help?
Business Chamber Queensland can now offer employers the opportunity to purchase a solicitor-written Settlement Template. The template is $660.00 for members and $880.00 for non-members. Included in the purchase of this template is 30 minutes of document tailoring by one of our Workplace Relations Consultants to suit your business circumstances.
If you would like to purchase the Settlement Template or have any questions on settlement agreements, don’t hesitate to contact our Workplace Services Team on [email protected].
Business Chamber Queensland members with HR services as part of their membership are invited to contact the Workplace Advisory Services Team:
P: 1300 731 988
Businesses who do not have a HR membership may also seek assistance, however, a competitive consultancy fee will apply for any advice and assistance provided.
For membership queries, please contact our membership team on 1300 731 988.
