The Fair Work Commission’s Full Bench has recently considered whether a binding settlement agreement had been reached earlier by the parties prior to the hearing of an unfair dismissal claim.
Senior Associate, Damon King and Solicitor, Emma Scotney discuss the facts and the guiding principles endorsed by the Full Bench for parties seeking to effectively negotiate a valid settlement of employment related claims.
Mr Singh was dismissed from his employment with Sydney Trains following a lengthy investigation into two safety incidents.1 Mr Singh afterwards filed an unfair dismissal claim with the Fair Work Commission (FWC) seeking reinstatement.
Shortly prior to the hearing the parties discussed settlement options.
As is commonplace nowadays, the negotiations occurred entirely by email and culminated in a draft deed being prepared by Sydney Trains which was accepted by Mr Singh’s lawyer, subject to “[the need to make] a few (what I consider to be) minor alterations and I will send an updated version to you shortly”.
The parties informed the FWC to vacate the hearing dates on the basis that Mr Singh’s unfair dismissal claim had been “settled in principle, subject to signing a deed”. Mr Singh’s lawyer expressly reserved his client’s right to seek to have his claim relisted for hearing in the event that the deed was not signed.
Mr Singh subsequently terminated his solicitors’ retainer and refused to sign the deed in its final form. Mr Singh notified the FWC that his unfair dismissal claim had failed to settle. Sydney Trains nonetheless argued (as a preliminary matter prior to the hearing) that a valid settlement had been concluded and, as a consequence, Mr Singh should be barred from pursuing his unfair dismissal claim.
Deputy President Sams held that the parties had reached finality in arranging all the essential terms of their bargain and intended to be immediately bound.
Sams DP found that a binding agreement had been practically reached, prior to the delivery of the deed, on the written acceptance of Mr Singh’s proposal for reinstatement, but subject to certain qualifications communicated by Sydney Trains. Those qualifications included the need for Mr Singh to sign a deed with confidentiality provisions and to submit to and pass a fitness for work assessment.
In the Deputy President’s view, it was critical to make a distinction between the “essential” and “ancillary” terms of any concluded settlement bargain and that the return to work qualifications were the latter.
Mr Singh appealed on the basis that such a distinction was erroneous and that not all of the settlement terms had been agreed by the parties.
The Full Bench agreed and overturned the decision on the basis that there was no fully concluded agreement reached to settle Mr Singh’s unfair dismissal claim.2
In its reasons for allowing the appeal, the Full Bench endorsed a number of important principles for determining when settlement negotiations are concluded and will be binding and enforceable:
- an acceptance precisely corresponds to an offer if it is an unequivocal acceptance of the terms offered;
- an acceptance is not an unequivocal acceptance of the terms if it deviates from the offer, even if that deviation is not material or important. However, if a new term is included in a purported acceptance of an offer, and that new term is solely for the benefit of the person making the offer, this will constitute a valid acceptance;
- an acceptance will be effective if it does not depart from the terms of the offer, but simply repeats in the offeree’s own words the effect of the offer;
- an acceptance will be effective if it sets out expressly what would be implied by law in the absence of express agreement; and
- if a purported acceptance of an offer merely includes the machinery of working out what was meant by the offer, it is on the same plight as a request for information. Such a request for information does not revoke the offer and may constitute acceptance of the offer.
The Full Bench held that the qualifications imposed by Sydney Trains in response to Mr Singh’s proposal for reinstatement were not solely for his benefit, implied in nature, or otherwise in the form of machinery terms for working out what was meant by the offer.
Mr Singh’s solicitors’ positive email response to the draft deed proposed by Sydney Trains was also not sufficiently unequivocal in nature to constitute acceptance of a counter-offer.
Key learning points
It is not uncommon for litigants, between the reaching of a settlement “in principle” but before a final written settlement agreement is signed off, to experience “settler’s remorse”, resulting in a dispute about whether a final settlement has been reached.
As demonstrated by the facts of this case, it is imperative for the terms of any settlement offer to be drafted in clear and concise terms and, likewise, that acceptance of an offer is unequivocal in nature, or alternatively, expressly qualified on the basis that it is subject to and conditional upon the signing of a formal agreement. Any settlement documentation formalising the terms should be promptly prepared and signed by each party to the dispute.