Can an employee reject a signed settlement agreement?

The Fair Work Commission (FWC) recently dealt with a case involving a worker who filed a general protections application against his employer.

The worker claimed that he was unfairly dismissed and sought a certificate from the FWC to pursue the matter further. However, the employer raised a jurisdictional objection, stating that the application was barred by a settlement agreement reached during a conciliation conference.

In this case, the FWC had to determine whether a binding settlement agreement was indeed reached between the parties during the conciliation conference.

The decision looked into the details of the conference proceedings, the communications exchanged, and the legal principles surrounding the formation of a contract.

Background of the case

The worker started his employment with the employer on 7 June 2023 as a director in business development.

On 7 December 2023, the worker was notified in writing that his employment was being terminated effective immediately. Following this, the worker filed a Form F8 application with the FWC on 20 December 2023.

The employer filed a Form F8A Response on 5 January 2024, which did not identify any jurisdictional objections to the application.

A telephone conciliation was conducted by FWC staff conciliators on 23 January 2024, but it did not result in a settlement of the dispute. The matter was then allocated to a FWC commissioner on 23 February 2024.

The conciliation conference

On 6 March 2024, the commissioner conducted a conference in relation to the worker's application pursuant to s.368 of the Fair Work Act 2009.

During the conference, the parties engaged in settlement discussions, and a basis for an agreed understanding was reached. The terms involved the employer providing the worker with an agreed settlement sum, and the worker retaining the ability to pursue an alleged underpayment claim.

The FWC provided a draft deed to both parties for their review and consideration. The parties made amendments to the draft deed, and a finalized version was sent by the FWC.

 The FWC then proceeded to read the entire content of the deed, and both parties agreed to the terms of the settlement. According to records, both parties have verbally agreed to accept the terms.

Dispute against settlement deed

Following the conference, the employer signed the Terms of Settlement and sent it to the FWC. However, on 7 March 2024, the worker emailed the FWC indicating that he would like to exercise his option to 'opt-out' of the settlement reached and requested a certificate be issued.

The worker claimed that “upon closer review of the terms, [he] discovered a major conflict with his alternative underpayment of salary claim.”

The FWC advised both parties that it was the commissioner's preliminary view that a binding agreement was reached during the conference on 6 March 2024.

The worker provided further submissions stating that he understood from the FWC's email that he had 24 hours to review the terms and decide whether to proceed with signing the deed.

The employer maintained that a binding settlement had been reached and objected to the worker's request for a certificate.

Can you challenge a signed settlement?

The FWC applied the legal principles surrounding the formation of a contract to determine whether a binding agreement was reached during the conciliation conference.

The central issue was whether the parties intended to create legal relations and bind themselves to a contract.

“It is well established that the question of whether the parties intended to bind themselves to a contract is to be determined objectively, having regard to the intention disclosed by the language the parties have employed,” the FWC said.

The FWC considered the communications between the parties, their dealings leading up to the alleged contract, and the language used by the parties in their acceptance of the offer.

“Ultimately the question is whether 'a reasonable recipient of the acceptance would have regarded it as corresponding to the offer or whether they would have taken the acceptance to be qualifying the original offer such that it would amount to a counter-offer, or at any rate, not an unconditional acceptance of what was originally offered'," the FWC said.

Based on the evidence and the recording of the conference, the FWC concluded that a binding contract was formed when both parties agreed to the terms of settlement read out by the commissioner.

“I consider this to be a clear and unambiguous acceptance by [the worker] of the terms of the agreement reached. Further, [the worker's] and [the employer’s] affirmative responses to my question asking them whether they agreed to these terms of settlement indicated an offer, acceptance, intention to create legal relations, consideration, certainty and capacity. Therefore, a binding contract was formed,” the decision said.

The FWC determined that the worker's contention that the email from the FWC stating "If acceptable" provided him with an opportunity to opt-out of the agreement was not supported by the evidence.

The language used by the parties during the conference conveyed a clear intention to be bound by the terms of the settlement.

In conclusion, the FWC found that a binding settlement agreement was reached between the worker and the employer during the conciliation conference on 6 March 2024. Consequently, the worker's application for a certificate to pursue the matter further was dismissed.