How binding is a settlement agreement?

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This was the question raised in Mdawini & Another and Mearns Farming (Pty) Ltd t/a Sherwood Farm (2024) 45 ILJ 1885 (CCMA), and there are certain things to consider when entering into a settlement agreement.

This case turns on a domestic worker and her son, a general worker, who had been employed on a farm for several years, and who were suspected of being involved in the armed robbery of a neighbouring farm. The neighbouring farmer had asked the employer to submit these employees to polygraph testing along with his own employees, after they had been implicated in the robbery by informants.

The polygraphs of both these employees indicated deceit in their responses to the questions posed to them. As we are all aware though, a polygraph is not enough to justify dismissal in the absence of other corroborating evidence, as was the case here. The employer then sought advice from an attorney, who advised him to offer the employees a mutual separation agreement. The employees both signed this agreement, and subsequently referred an unfair dismissal dispute to the CCMA.

At the outset, the commissioner noted that mutual separation agreements are valid and enforceable and that parties who settle an existing dispute in full and final settlement should not be lightly released from agreed undertakings, seriously and willingly embraced. However, he found that the terms of the agreement in this matter were not ‘seriously and willingly embraced’ by the parties on the bases that:

(a)    the agreement was entered into because there was insufficient evidence to secure a finding of guilt, the results of the lie detector test having been uncorroborated;

(b)   the caveat subscriptor (let the seller beware) rule did not apply and, as a consequence, the so-called settlement agreement was unenforceable because the terms of the agreement were misrepresented by Mr Sibeko, the employer’s attorney;

(c)    no evidence was presented by the employer to show that the employees were given an opportunity to seek advice on the terms of the agreement before signing it; and

(d)   the evidence of both employees was that they were told by Mr Sibeko that if they did not immediately sign the agreement, they would not receive any money.

The commissioner found the agreement to be unenforceable and ruled the dismissals both substantively and procedurally unfair. In turning to the remedy, however, the commissioner considered the unusual circumstances of the dismissal, the close relationship required between a domestic worker and her employer, the special living arrangements on farms, and genuine concerns that farmers have for their own safety and that of their families. In light of these considerations, reinstatement was deemed inappropriate, and the employees were awarded three months’ wages as compensation, taking into account the monies already paid in terms of the mutual separation agreement.

The key takeaway here is that the circumstances under which mutual separation or settlement agreements are concluded will have bearing on whether such agreements are enforceable. Agreements in full and final settlement of disputes must be seriously and willingly embraced. This would require that the parties are made fully aware of their rights, of the terms of the agreement, and that they be given an opportunity to seek advice and time to properly consider the agreement before coming to a decision. In the absence of these elements, such agreements may not be worth the paper they are written on.

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