Employment lawyers and advocates place a high value on the “sanctity” of mediated settlement agreements, particularly their “confidentiality”. But what happens when the confidentiality of mediation can’t contain serious wrongdoing, and there’s a blowout involving media, Police, WorkSafe or the IRD?
Ten years ago, almost all mediations were supervised by an MBIE mediator. Now, most are not. Covid is a factor, but even in 2019 before the pandemic started, the number of mediations held in front of a MBIE mediator had reduced to around 40%, according to an OIA response.
(Source: MBIE)
Add the effect of Covid and you’ll see how the unsupervised smoko room mediation is now the norm. Once the Record of Settlement (RoS) is uploaded to MBIE’s website, an officer of MBIE will contact both parties on the phone numbers provided and ask if they understand the implications under Section 149, along with making sure no breach of the Minimum Wage Act has occurred. Those implications are that when it is signed off by MBIE, the settlement contract becomes “final, binding and enforceable”.
A key reason for the confidentiality of RoS is that if an employee exited an organisation with a payout as part of the negotiated settlement, and disclosed how much they got paid to former colleagues, that could embolden other employees to raise Personal Grievances at great expense to the employer. Reiteration of the need to keep the terms, and sometimes even the existence of the RoS confidential may be included in that phone call.
What could possibly go wrong?
Plenty, as it happens. If a RoS overreaches, the following could run roughshod over it:
Mainstream media - As we see from Hamish McNeilly’s article for Stuff. A Dunedin chef applied for jobs, sometimes accepting one day trials. Whenever the business owners decided against offering him a job, Tapper-Norris would then assert that he was an employee based on a purported verbal agreement, and any “misunderstanding” around an offer of employment could be resolved in mediation where he would demand, and often receive, a settlement payout (reportedly ranging from $2,000 to $6,000) to avoid ERA proceedings.
New Zealand Police – who generally try to avoid getting involved in civil disputes but are unlikely to recognise a contract that purports to prevent a person, such as an ex-employee, from reporting fraud, because thet’s actually criminal.
Inland Revenue – Where a RoS enables tax evasion through tax-free payments that a RoS may provide for, the IRD may start to take notice. Bracket creep caused by a 7% inflation rate is likely to incentivise contracts that allow tax evasion under the cloak of confidentiality.
WorkSafe – Where a Health and Safety problem is successfully converted to a WorkSafe-proof employment relationship problem and “resolved” in an employment mediation, without mitigating the actual hazard, WorkSafe are unlikely to respect the “sanctity” of any RoS that hid the hazard. After years of copping flak for never having prosecuted a workplace bullying complaint, WorkSafe could be on the lookout for someone to make an example of for all we know.
Social media – Parties who remain aggrieved may be tempted to post comments that skirt a non-disparagement clause, in circumstances where they might expect to get away with it. A Council CEO who recently signed off on proceedings to enforce a seven year old RoS against a former property manager was reputationally damaged after the sued party posted a running commentary of the ERA proceedings on Facebook, as was his right.
Protected Disclosures – If it’s suspected that a departing employee is gagged from reporting alleged wrongdoing or serious wrongdoing, that would tend to erode trust. Former colleagues who share those concerns may get wise to these management practices and seek alternative employment which is a significant expense to the employer as well as a risk that the departing employee’s exit interview or questionnaire is going to look interesting!
Law Society / ELINZ – We know of employees’ lawyers or advocates who have “flipped” in exchange for a secret commission, or simply inflated fees paid by the employer. Any lawyer who does this can be reported to the Law Society. Advocates are outside the jurisdiction of the Law Society. Some are members of ELINZ, but not all, and an ELINZ member has the option of resigning their membership to avoid an investigation into their conduct, as per this example from 2020.
Back in 2004 Chief Judge Goddard ruled that a party can’t just put anything they like in a RoS in Ozturk v Gultelin. In 8i Corp v Marino Judge Inglis’ 2017 ruling (a few months before becoming Chief Judge) was similar though narrower in scope. Such rulings are rare and Section 149 (mediation) scams are now ubiquitous. As proposed Fair Pay Agreement legislation is currently diverting attention, expect this to get worse before it gets better.
But there is hope, as we have finally seen a mainstream media article on the mediation process being used to scam people.
For the record, the author has never been in an employment mediation and has been self-employed since 2014, so no RoS enforcement is possible.