There sometimes comes a point in an employee/employer workplace dispute when an employee says “I don’t want to fight the employer any longer, I just want to end the employment with some dignity and a fair settlement”. Careful thought needs to be given to any without prejudice settlement offer involving separation of employment. To be clear, we are not dealing with situations where there is litigation already on foot (or a WorkCover application under way) when other factors may be relevant. Just occasionally, an employer will be open to an offer but it generally depends on two things that both employer and employee need to agree on:
- That there is a problem which needs to be solved; and
- The amount to be paid to solve it.
Often, employers have not reached the same conclusion that there is an issue which needs solving. Take for instance a long term employee who is having their duties modified without redundancy taking place. Or an employee having to deal with a difficult (sometimes new) manager who is engaging in bullying behaviour. Employers (particularly large employers) may wish to be seen to be adhering to rules of corporate behaviour and agreeing to a settlement may be perceived as admitting to having done something wrong. Employers (particularly with the guidance of human resources professionals) may take the position that employees are entitled to use the raft of legal avenues available to disgruntled employees (ranging from internal complaints to applications to the Fair Work Commission for stop bullying orders and workers compensation applications, to name just a few) and any such action will be treated on its merits. Employers may consider that they are on the right side of the law and may have the resources to deal with any legal complaints that may be raised. This may mean they are less open to a settlement offer.
The following is a non exhaustive list of factors for consideration when making a without prejudice settlement offer:
- Don’t be the first one to make an offer. It is possible that this will be seen as a sign of weakness by the employer. They may say to themselves that if they hold out, you will probably leave voluntarily anyway without them having to pay money or they may be able to hold out for a better deal. The ideal approach is to push back politely against changes, utilise available internal processes and try to lead the employer to the point where they come to the realisation that a practical resolution is preferable and they make an offer to you. Sometimes, external legal action is necessary to gain some leverage. The more detailed and precise you can be about particular wrongful actions by the employer, the better. Like any strategy though, it sometimes doesn’t work.
- Why should the employer settle? Don’t be fooled by people telling you that “the company always settles”. This is not always the case. Generally speaking, the larger the organisation the harder it is to get an “easy” If making an offer, it is best to put yourself in the employer’s shoes and ask yourself why it is in the employer’s best interests to be making this payment. Think about the legal strength of your case. Is this the right time to be making an offer or are there other steps that should be taken to secure some leverage before an offer is made?
- Any without prejudice settlement offer should be made separately to any formal complaint or response to disciplinary or performance improvement action.
- Any without prejudice settlement offer needs to be reasonable. The employer is not generally going to agree to an amount that only a court is likely to award after a long and troublesome hearing process. The offer needs to be attractive to the employer which generally involves some compromise by you. In many cases, a reasonable benchmark is what you would get for notice and redundancy pay if your job was made redundant. Of course, there are certain tax benefits if employment is ended due to redundancy which mean more dollars in your back pocket but employers will often not agree to the employment ending on this basis if the job is not actually redundant. Whilst any offer should be expressed in gross terms, you need to consider what the nett amount of your offer will look like in your back pocket. Also dont discount the significance of non financial components such as a resignation, statement of service and mutual non disparagement.
- There should be a rational explanation for the settlement asked for. For instance, that it is likely to take several months to find other employment. Sometimes, it is worth asking for some of the settlement amount to be classed as a capital sum for general damages for pain and suffering or humiliation and distress which can increase the nett amount you receive. However, you have to be careful not to inflate this figure as the ATO sometimes audits settlements to ensure the government is getting its fair tax share or the employer may ask for medical evidence for support. Don’t forget to take into account other entitlements such as annual leave, long service leave and commissions or bonuses. And consider how much time is specified for the employer to pay any settlement amount.
- There is often little point in paying money to lawyers to write letters on your behalf. Our approach is to give employees the bullets to fire themselves as there is usually more chance of a compromise being reached between the workplace parties themselves. Similarly, there is little point in asking employers to pay for legal costs in most instances where no legal obligation to do so can arise.
- Don’t make an offer in haste. Once made, it can be practically difficult to withdraw and, if accepted, you will have a long time to reflect on your actions. Give the employer a reasonable time to respond to your offer.
- Always have a Plan B. If your offer does not work, and if the employer does not make any suitable counter offer then you may need to consider your course of action as it can be difficult to go back to business as usual in this situation. You also need to consider the emotional toll of the ongoing situation. Are you prepared to accept a lesser amount?
- If there is a settlement, you will almost always have to sign a release agreement. This will usually involve you signing away all of your rights to take legal action in relation to anything that has occurred during your employment, with the exceptions of statutory workcover claims and unpaid statutory superannuation. You should be very careful about signing a release and seek advice because it may mean you cannot bring a common law workcover claim. You also need to consider whether you will have any ongoing obligations to the employer such as confidentiality or post employment restraints. Once signed, a release is a binding agreement.
The points made in this bulletin are general in nature and will not apply in all instances. Each case is different and needs to be judged on its own strengths and weaknesses including the type of damage suffered legal avenues available. It is wise to get legal advice before embarking on a particular course of action and ascertain how strong your underlying legal position is. Please contact us if you would like any further information or help.
Merry Christmas and Best Wishes for the New Year. Our office will be closed for the public holidays over the Christmas New Year period.