ACT’s Small Business spokesperson Laura Trask recently introduced a private member’s bill which provides for the mutually agreed end of employment. This appears to have slipped largely under the radar, but if passed could have a significant impact on employee rights and entitlements.
The bill allows for “protected” negotiations to occur between an employer and employee to end the employment. In particular, it provides for an employer to make an offer to an employee to terminate the relationship and as part of that agreement, to pay to the employee a specified sum in full and final settlement of all matters.
The fact of making this offer can not give rise to a personal grievance and there does not need to be an employment relationship problem in existence before it occurs. Evidence of these “pre-termination” negotiations is strictly “without prejudice” or “off the record” and inadmissible in any proceedings except where the communication occurred for a dishonest purpose or for the purposes of committing an offence.
There are some protections contained in the bill, including that the employee must be advised of their entitlement to seek independent advice and given a reasonable opportunity to do so before signing any agreement.
The Explanatory Note to the Bill states that an employment agreement may be terminated in this way if, for example, “the demands of the business mean that it is imperative to dismiss the employee”. It is unclear what this means but the bill itself does not contain any limitation on when an employer can engage in this type of “off the record” discussion with an employee.
In a press release Trask is quoted as saying: “Hefty legal fees for personal grievances and unfair dismissal claims should not be seen as “the cost of doing business”. So my bill makes it easier for two adults to come to an agreement, shake hands, and move on to greener pastures before any dispute is escalated to the Employment Relations Authority”.
This may sound sensible in theory, but the reality is that when an employment relationship breaks down, this is typically because performance or misconduct issues have arisen and the employer has lost trust and confidence in the employee.
In this context there is a significant risk that an employer could seek to engage in “protected” discussions of this nature by way of giving the employee an ultimatum - accept what is being offered or be fired. Given the stigma associated with being dismissed, an employee may have little bargaining power in this situation.
This is why the current legal position is that an employer can not engage in “without prejudice” communications unless there is mutual agreement that there is an “employment relationship problem” or dispute on the table and both parties agree to participate in these discussions with a view to resolving it. There are also protections for an employee where the agreement is expressed in unconscionable terms or is found to have been procured by improper pressure or duress.
The ability of parties to negotiate an end to an employment relationship is an important one. In this regard the Court of Appeal has said that the ability to engage in “with prejudice” communications recognises “that employment relationships are more likely to be successful if problems in those relationships are resolved promptly by the parties themselves”.
They also enable the parties to reach an agreement which provides for a dignified exit and one which safeguards the employee’s reputation and best positions them for future employment opportunities.
But there must be checks and balances. This private member’s bill would create an unbridled ability for an employer to present an employee with a fait accompli, under the cloak of “legal privilege”. This is likely to result in unjust outcomes for the most vulnerable who feel they have no choice but to accept what is being offered with little ability to negotiate.
This article was originally published in The Post
