There have been two recent cases in the Fair Work Commission where the employee has challenged the settlement reached at conciliation. In one, the deal was undone and in the other, the employee was held to the terms of the settlement that he had signed.
As a reminder, employees who have been dismissed can make two types of application to the Fair Work Commission, alleging they have been unfairly dismissed (i.e. an unfair dismissal claim) or unlawfully dismissed in breach of the general protections provisions in the Fair Work Act (i.e. a general protections claim).
One of the first steps that the FWC will make in both types of matters is to organise a conciliation conference, which is like a mediation to see if the parties can reach a negotiated settlement.
If an unfair dismissal claim does not settle, the FWC has the power to arbitrate to decide if the dismissal was fair or not.
In general protections claims, the FWC’s involvement is generally limited to the conciliation conference and dealing with initial “jurisdictional” questions. If the matter does not settle at conciliation (and if the employer’s jurisdictional objections are overcome) then the employee must take their claim to the Federal Court or Federal Circuit Court to proceed further.
The unfair dismissal case – No deal!
In a recent unfair dismissal case, the employee and employer reached an “in principle” settlement on the day of the conciliation conference that the employer would pay the employee a further three weeks’ pay. The conciliator sent both parties an email confirming settlement had been reached and reminding the parties to finalise, sign and exchange a settlement agreement.
The employee’s solicitor then sent a proposed “Deed of Release” (the document recording the terms of the deal) to the employer’s solicitor. This version for the deed contained a broad “mutual release” clause which would have operated so that both parties released the other from all claims relating to the employment and the termination (i.e. a full release).
The employer sent back some amendments to the deed including one limiting the release only to claims relating to the unfair dismissal allegations. The employer did not want to release the employee from her post-employment contractual obligations (e.g. restraints of trade and contractual confidential information protections).
The employee argued that the employer’s narrow release had not been discussed or agreed during the conciliation and pressed for the “customary full release”. The matter degenerated into a dispute about what was said by whom at the conciliation conference.
The employee’s lawyer asked the FWC to set the matter down for arbitration on the basis no agreement had been reached. Commissioner Bisset then had to decide whether the settlement stood or the matter should be referred for arbitration.
The decision
Commissioner Bissett looked at the notes made by the lawyers during the conciliation conference and found that there was no evidence that the scope of the mutual release (one way or the other) had been discussed or agreed. The Commissioner held that there had not been a “meeting of the minds”, so there could not be a binding agreement. This meant the unfair dismissal application remained unsettled and so it was referred to arbitration.
Tao (Tara) Zhang v Spring FG Accounting Pty Limited [2021] FWC 14 (4 January 2021)
The general protections case – We have a deal!
In a case that went the other way, an employee who had signed a settlement document tried to back out of it so that he could pursue his general protections claim.
The reasons he gave why the settlement should be undone included that he was suffering from post-traumatic stress disorder; the employer was represented while he was not; he was not properly prepared for the conciliation conference; the Commissioner overseeing the matter had provided misleading information about the cost of taking his matter to the Federal Court and there was insufficient time for him to consider his position.
The employee had lodged his claim with the FWC and then the employer raised jurisdictional objections which were heard by Commissioner Platt. After the jurisdictional hearing on 4 March 2021 and before the Commissioner decided those issued, he invited the parties to participate in an “off the record” conciliation conference with him. An “in principal” agreement was reached on 4 March 2021 and the matter adjourned until the next day.
On 5 March 2021, the employee confirmed to Commissioner Platt that he had received a copy of the deed that the employer’s lawyer had prepared overnight. He summarised it and advised that he was of sound mind and agreed to settle his claim on the terms in the deed. He provided his ex-employer with a signed copy on 8 March 2021.
However, the employee failed to lodge the paperwork to discontinue his claim. When the Commissioner’s associate prompted him to do so on 21 April 2021, he argued the settlement was not binding and he wanted to proceed with his claim.
Commissioner Platt made a decision responding to the employee’s arguments and concluded that the employee had not been pressured or rushed during the Commission proceedings; he was of sound mind; and he had indicated that he correctly understood the terms of the settlement he was entering into.
Commissioner Platt said that “buyer’s remorse” was not an appropriate basis to undo a properly founded settlement. He refused to give the worker the certificate he needed to take the matter to the Federal Court and closed the Commission’s file.
Chris AKA Christopher Lawless v Australasian Association of Philosophy [2021] FWC 2832
The takeaway
These cases serve as a caution to parties to maintain discipline when finalising settlement negotiations at conciliation conferences at the Fair Work Commission (and in other tribunals and courts). Settlements often arrive at the end of a long day, following weeks or months of intense preparation in the context of litigation.
Parties must be careful not to hurriedly refer to the “usual terms” in settlement negotiations and assume that there is a common understanding about what is being discussed and agreed.
Good mediators, including members of the bar and the bench (as in the case of Commissioner Platt) understand that their job is not complete until the parties have both put their signatures on the settlement agreement. Conciliators appointed by the FWC unfortunately do not often have the time or remit to see a matter through with the same level of scrutiny.
If you are participating in a conciliation conference at the Fair Work Commission, make sure that you are prepared and that you understand the terms that you will accept and can communicate these clearly. Ideally you will have a draft deed of release in your back pocket so that the written terms of the deal can be “signed sealed and delivered” on the day.
Finally, it is worth considering why the employer in the unfair dismissal claim discussed above was willing to walk away from a settlement that would see the claim finalised relatively cheaply with the payment of only an additional three weeks’ pay. In that case, the employee was an accountant and the employer was an accounting firm. One can only speculate that the post-employment restraints in the accountant’s employment contract that protected the firm’s clients and business were more valuable that the combined worth of the additional payment and the potential costs and risks of defending the action.
~ with Alexandra Culshaw, Graduate at Law
