Final and binding…or is it?

The Employment Relations Authority has held a settlement agreement was not valid as the parties had relied on incorrect information

Mr Bagley was employed by Deloitte as an Associate Director in the Oracle Practice. In June 2018 it became clear that Oracle’s profitability was short of budget. The decision was made to consider restructuring the Oracle business. A meeting took place between Mr Bagley and Mr Glover, a Partner. It quickly became apparent to Mr Bagley that the parties were discussing a “likely restructure which would result in my position begin disestablished.”

Following the meeting, Mr Bagley was advised by HR that he was not entitled to compensation if his position was made redundant. On 30 June 2018, Mr Bagley signed a settlement agreement ending his employment. The agreement did not include redundancy compensation but a significant tax free payment under section 123(1)(c)(i) was made together with notice and commission. Before signing the Record of Settlement, Mr Bagley had taken the opportunity to obtain legal advice, had reviewed his employment agreement, and had reviewed Deloitte’s intranet to see if there were any redundancy policies. He had not been able to find any redundancy policies and relied on the advice of HR that he was not entitled to redundancy compensation.

A week later Mr Bagley was made aware of a redundancy policy dated October 2017 which entitled him to redundancy benefits. He immediately alerted Deloitte. Deloitte dismissed his concerns and referred to the settlement agreement as being full and final, and as having been signed off by a mediator, meaning it could not be reopened or renegotiated. Mr Bagley sought his entitlements in the Employment Relations Authority.

Employment Relations Authority

Deloitte accepted that it had provided incorrect advice to Mr Bagley. However, it attempted to rely on the wording of the Record of Settlement which said it was in “full and final settlement”. Deloitte argued the Record of Settlement was agreed to as an alternative to a possible redundancy, and as redundancy was in contemplation when the agreement was signed any claim in connection with redundancy was settled by the Record of Settlement.

Mr Bagley said he was entitled to rely on information provided to him on behalf of Deloitte, but that the information provided was incorrect. As he had been misled when entering the Record of Settlement, it should be held invalid. He argued that it would be unfair and inequitable to allow Deloitte to benefit from its own error, to Mr Bagley’s detriment.

The ERA referred to two English judgments which considered the extent to which the “restrictive statutory scheme for challenging employment settlement agreements prevented the Court from intervening.” In both cases, the Tribunal had held that agreements reached under the statutory scheme had to be valid agreements. The ERA said the Record of Settlement between Mr Bagley and Deloitte could not be valid because Mr Bagley had relied on the mistaken representation by Deloitte.

Despite this finding the ERA declined to award a remedy to Mr Bagley. It noted that the payments made under the Record of Settlement amounted to a greater figure than what he would have been entitled to if he had been made redundant. The ERA said a further payment to Mr Bagley would not be just or equitable.

Learnings

Care should always be taken to provide employees with accurate information relating to their employment entitlements. An otherwise ‘full and final’ settlement may not be so when incorrect information is relied on to the employee’s detriment. Policies should be reviewed regularly so that they are up to date and reflect the employer’s intentions. HR staff should be encouraged to be familiar with policies, codes of conducts and manuals.

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