How Do Settlement Agreements Work in New Zealand?

Settlement agreements can help to formally resolve disputes between employees and employers. They often follow successful mediation processes, a precursor before disputes go to a formal New Zealand court. Mediation aims to arrive at a compromise between the parties, and a settlement agreement often formalises this compromise. Settlement agreements are binding, full and final settlements. 

This article will explain how settlement agreements work, how they fit into the mediation process and what information is necessary to submit a settlement agreement for sign-off by Employment Mediation Services.

How Settlement Agreements Work

In essence, a settlement agreement (or a record of settlement) is a formal document setting out the terms by which parties agree to end their dispute. In employment law, settlement agreements are helpful to resolve personal grievances that an employee raises against their current or former employer. 

The settlement agreement becomes a full and final, binding settlement once a mediator from the Employment Mediation Services signs the document. Before signing, a mediator will check that the agreement complies with the law and that the parties understand that the settlement will become final once signed.

A settlement agreement can resolve any issue between an employee and an employer. However, parties commonly use settlement agreements at the conclusion of successful mediation processes.

How Settlement Agreements Fit Into the Mediation Process

After reaching an agreement in a mediation meeting, the mediator usually writes down the conditions parties agree to. These conditions would make up the terms of the agreement that the parties sign. This is a settlement agreement or record of settlement. Once the parties and the mediator have signed this document, the agreement becomes a full and final settlement. Hence, neither party can reopen the issue (even if they change their minds later).

Note that there are limits on what a mediator will sign off on. While there is a wide range of terms in settlement agreements, reflecting the diversity of different employment disputes, not all of these will be legal.

Required Information for Settlement Agreements

It is essential to ensure that settlement agreements have all the required information before submitting to Employment Mediation Services for formal sign-off. Without this information, they will send the agreement back for you to amend. The fundamental things to include are:

• contact details for all parties, including full names, phone numbers, email addresses and physical addresses; and
• a copy of the signed agreement, with both parties’ signatures. This can be either an electronically-scanned copy or a paper copy.

Further, all involved parties must provide their contact details. This is so the mediator verifying your settlement agreement can get in touch to check that the document is correct. The mediator also needs to confirm that the parties understand that the settlement will become final once signed.

Settlement agreements that have been signed by all parties involved can be submitted online for sign-off here.  

Key Takeaways

Settlement agreements are useful for both employees and employers. These agreements help to resolve employment disputes before they escalate to an expensive court case. In a settlement agreement, parties have control and flexibility over the terms that they agree to. While they commonly are used to end mediations, you can use them at any point to resolve disputes between employers and employees. Note that settlement agreements are full and final. They become binding when Employment Mediation Services have signed them off. 

If you have any questions about settlement agreements, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

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