More and more these days we are faced with the situation where an employer and an employee are involved in a dispute, but wish to end the relationship amicably, with no legal action.

The question is whether a mutual agreement to terminate the employment relationship is valid and binding on the parties. The Labour Court in Gbenga-Oluwatoye v Reckitt Benckiser South Africa (Pty) Limited and Another (2016) considered this exact question.

The relevant facts in this matter were that the employee was called to a disciplinary hearing for misrepresentation. He however concluded a mutual separation agreement with his employer. This agreement included the following terms:

  1. The agreement was “in full and final settlement of all claims of whatsoever nature and however arising between the parties”;

 

  1. The employee acknowledged that he agreed “without duress or undue influence”;

 

  1. The employee “voluntarily” waived his rights to notice period payment and his right to approach the relevant authority for relief relating to his employment, resignation and or the agreement.

 

Despite the agreement which was concluded the employee approached the court and alleged that the employer forced him to sign the agreement against his will. He further alleged that it infringed his constitutional rights and was therefore void. The court a quo held that the agreement reflected a valid compromise and dismissed the employee’s application. The appeal court held that this sort of agreement should be treated exactly the same as any other agreement between an employee and an employer. It could be void, should it be shown that improper influence was present, the employee however failed to show this.

With regards to the alleged infringement of the employee’s constitutional rights the court held that the employee’s bargaining power at managerial level was such that he was aware of the consequences of the agreement and the limitation on his rights was reasonable. It was held that the intentions of the parties was clear.

The court also held that full and final settlement clauses are not contrary to public policy. Employers must nonetheless remain careful and not exercise undue influence in concluding these agreements as they may then be declared void. Validly concluded mutual agreements to terminate employment are however binding on the parties.