A record of settlement is an agreement reached between an employer and employee that resolves an employment problem. Records of settlement are confidential and contain the terms that are agreed to by the parties.

Once the settlement is signed by a mediator, it becomes final, binding, and enforceable. If either an employer or employee breach the settlement, steps can be taken in the Employment Relations Authority to enforce the agreement, and even seek a penalty against the breaching party.

In a recent case an employer and employee resolved an employment problem by signing a record of settlement. The settlement included terms that neither party would disparage (speak poorly or critically) about the other, and that the employee would be provided with a pre-written reference.

Additionally, if any future employers called for a reference of the employee, the employer was to provide answers consistent with the written reference.

The employee applied for several jobs but, after the reference check stage was completed, he was turned down.

The employee learned that his previous employer, when asked if they would employ him again, had said they would not. When asked why not by the potential employer, they replied that the employee did not “fit with, or align to, their values”.

The employee applied to the Authority to enforce the settlement and for a penalty to be ordered against the employer.

The Authority held that by telling prospective employers that they would not employ the employee again, and that he was not a good fit, it disparaged him and went beyond the agreed reference.

The Authority ordered the employer to comply with the record of settlement, and imposed a penalty of $10,800, 75% of which was payable to the employee.

When entering into a record of settlement it is important that employees and employers understand what the terms mean, and how to comply with them. Failure to do so may result in expensive enforcement action by the affected party.

If an employment problem is to be resolved by way of record of settlement, or there are concerns that a settlement is being breached, it pays to speak with a professional experienced in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-priced Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.