Breach of settlement agreement results in penalty…

The Employment Relations Authority has ordered an employer to pay a penalty of $600 after it failed to honour the mediated settlement entered into.

One of the settlement terms was that the employer paid $1,150 legal fees to the employee’s advocate.  The employer failed to pay those and gave varying reasons for not paying.

The employer claimed they did not have the financial resources to pay the amount, but would enter into a repayment plan.  They then claimed that they would not pay the legal costs because the employee had breached the terms of the settlement agreement. 

The ERA found that both reasons given did not justify not paying the legal fees agreed to be paid.  If the employer was not in a position to pay the amount, it should never have entered into the settlement agreement.  In addition the alleged breaches of the agreement by the employee did not entitle the employer to fail to keep its side of the bargain and it should have paid the legal fees.  There were no grounds for the employer to claim that the employee had breached the agreement.

As well as being ordered to pay a penalty of $600 (which would have been $2,000 but for the financial difficulties of the employer) it also was ordered to pay the $1,150 legal fees and ordered to pay $1,428 costs and disbursements.  So the failure to pay the legal fees ended up adding over $2,000 to the employer’s bill.



Alan Knowsley
Employment Lawyer
Wellington