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Tips, advice, and information for South African business owners

21 Nov

Neither Full, Nor Final

Nobody wants to waste time at CCMA hearings, let alone go to the trouble and expense of appealing an unfavourable judgment from an unreasonable commissioner. Full and final settlement agreements are a popular tactic for avoiding these headaches. However, as a recent Labour Court case highlights, they can backfire spectacularly (and expensively) if they aren’t implemented properly.

If you aren’t aware, full and final settlements essentially involve paying an employee who you don’t want in your business to go away and never bother you again by waiving their right to any further legal action. While they are intended to ensure a definitive resolution, they aren’t infallible. As we’ve highlighted before, it’s rare for them to be overturned in court, but not impossible.

Case in point: a recent dispute involving a manufacturer and a dozen former workers. The workers claimed that they had been coerced into signing settlement agreements; the company claimed that they had signed them voluntarily. Ultimately, the Johannesburg Labour Court had to decide who to believe.

According to witness testimony, the workers were individually summoned and instructed to sign the agreements or risk dismissal. There was no negotiation and they were not allowed any representation. Once they signed the agreements, they were immediately escorted off the company’s premises by security.

The balance of probabilities clearly didn’t favour the company, so it was no surprise when the Labour Court ruled in favour of the workers. The company was ordered to pay them compensation of eight months’ salary and cover their legal costs.

The obvious lesson here is that full and final settlement agreements can be overturned if they were signed under duress. However, what may not be so obvious is that the onus lies on an employer to prove that a settlement agreement was signed voluntarily if they want to have it enforced.

Therefore, pay attention to the entire settlement process, not just the agreement itself. Obviously the contract needs to be properly drafted, but the conclusion of the agreement also needs to be above board. Make sure that you keep a record of the latter in case your settlements are ever challenged.

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