Many people assume when they have entered into a binding record of settlement to resolve an employment relationship problem, that will be an end of the matter, other than for enforcement purposes. Well, not always so.
It is well established that records of settlement must specify exactly what the legal issues are that are being resolved between the parties. It is not sufficient to use the global expression ‘settles all matters between the parties’, without documenting exactly what the employment relationship problems are which are being resolved. This wording will not be effective in barring new claims raised after the record of settlement has been entered into even when the record of settlement has been certified by a Ministry of Business Innovation and Employment mediator.
Employees cannot sign away their minimum statutory entitlements either. So, for example, a settlement which resolves a dispute about annual holiday entitlement, cannot prevent a subsequent claim being brought about the calculation of their annual holiday pay.
For most employers, and many employees, securing agreement on confidentiality and non-disparagement is a valuable consideration in the overall settlement. However, there are two main circumstances when confidentiality must be breached. The first is if evidence is required from the employer when criminal proceedings have been brought against the employee arising out of the employee’s conduct in the employment. The second relates to mandatory reporting obligations.
Mandatory reporting obligations
Medical professionals, educators, lawyers, accountants and others whose work is subject to regulatory supervision and oversight under Professional Codes of Conduct and Statutory Complaints Schemes, cannot contract out of mandatory reporting obligations in records of settlement. These Codes and Complaints Schemes are designed to ensure a practitioner’s:
- compliance with regulatory standards;
- competency to provide a service to the public; and
- they are fit to practise.
If an employee works in a regulated profession and has been dismissed following an internal disciplinary or performance management process, or resigns during, or within 12 months of such a process, it triggers a legal requirement for the employer to file a mandatory report to the Regulator. The Regulator will then consider whether the conduct or behaviour reported contravenes, or may contravene, its professional Codes of Conduct or other professional standards. If it does, the Regulator will convene a professional standards committee to undertake a formal investigation.
Jane Evans-Walsh v Southern District Health Board
In the recent case of Jane Evans-Walsh v Southern District Health Board  NZEmpC 46, the Employment Court made it clear that even though the employer did not reach the stage of making a finding on whether misconduct or serious misconduct had occurred before a record of settlement was entered into, the employer’s confidentiality covenant, the non-disparagement covenant and the full and final settlement provisions did not give the employee immunity from a mandatory notification to the Regulator.
Jane Evans-Walsh was employed as a nurse in a specialist care unit of a hospital in Southland operated by the Southern District Health Board. In January 2016 and February 2016 the DHB received separate complaints from four nurses about Ms Evans-Walsh’s behaviour towards them. The complaints alleged bullying behaviour but they did not call into question the quality of Ms Evans-Walsh’s clinical care for patients.
The DHB appointed an independent investigator to make findings on whether the complaints were substantiated, if Ms Evans-Walsh had breached the DHB’s Code of Conduct, or the Nursing Council’s Code of Conduct. The investigator concluded the behaviour constituted breaches of both Codes of Conduct.
During the investigation Ms Evans-Walsh was on special paid leave by agreement. Throughout the investigation Ms Evans-Walsh maintained there was no substance to the complaints and her work was always of a high standard. She rejected the investigator’s conclusions in the report dated 10 June 2016 that the complaints showed a pattern of behaviour constituting workplace bullying and was serious misconduct. Ms Evans-Walsh also rejected her dealings with other nurses fell short of what was expected under the codes.
Between 15 June 2016 and 21 July 2018 there was consultation between Ms Evans-Walsh and the DHB over the contents of the investigation report. The DHB informed her its preliminary conclusion was that Ms Evans-Walsh had breached the Codes of Conduct, but it would decide what steps to take after receiving her response, and if it decided misconduct or serious misconduct had occurred it could lead to a full disciplinary investigation. Importantly, the DHB hadn’t adopted its conclusions she had breached the Codes of Conduct at this point.
On 25 July 2016 and 26 July 2016, several personal grievances were raised on Ms Evans-Walsh’s behalf alleging the DHB had unjustifiably disadvantaged her.
Record of settlement
Before the DHB had reached a conclusion whether misconduct or serious misconduct had occurred, it entered into a record of settlement with Ms Evans-Walsh. The settlement terms included:
- the terms were ‘confidential to the parties so far as the law allows’;
- both parties would not make disparaging comments about each other to third parties; and
- the settlement was full and final settlement of all matters between the parties arising out of the employment relationship.
On 14 October 2016, Ms Evans–Walsh resigned in accordance with the terms of settlement.
Notification to Nursing Council of New Zealand
On 31 January 2017 the DHB notified the Nursing Council of New Zealand pursuant to section 34 of the Health Practitioners Competency Assurance Act 2003 (HPCAA) of Ms Evans-Walsh resignation before the conclusion of an investigation into complaints about her competency. It sent copies of the nurses’ complaints and the investigation report to the Nursing Council.
The Nursing Council began an investigation. A professional conduct committee was established to investigate the complaint, which was summarised as allegations of bullying behaviour towards colleagues undermining their practice and confidence in decision-making and making disparaging remarks about colleagues.
Ms Evans-Walsh’s response was to invite the Council to dismiss the complaint under section 36(1) of HPCAA as frivolous and vexatious, because it had nothing to do with her competence as a nurse. Evans-Walsh also argued the DHB’s notification breached the settlement agreement and issued proceedings in the Employment Relations Authority. She sought a penalty, payable to her, and an order for the DHB to comply with the settlement agreement.
The DHB did not accept it had breached the settlement agreement. It also relied on statutory protection from civil liability provided in section 34(4) of the Health Practitioners Competency Assurance Act 2003 (HPCAA). The Authority determined that the whole matter should be removed to the Court.
Issues before the Court
Ms Evans-Walsh accepted that notification under the HPCAA is compulsory and that the duties imposed by it cannot be circumvented by a settlement agreement.
However, her case was:
- the notification was made carelessly;
- the facts supplied to the Nursing Council were in bad faith due to animosity towards her;
- the notification was a breach of confidentiality; and
- the DHB could not have properly decided to give notice under section 34(3) that her resignation was ‘…for reasons relating to competence’ because when she resigned, no conclusions had been reached about the complaints. The DHB had gone no further than to express a preliminary conclusion that was still being formally investigated.
The Court found no evidence of bad faith, animosity or carelessness. It accepted there needed to be a causal connection between Ms Evans-Walsh’s resignation and the DHB’s notice to the Nursing Council. However, it said Ms Evans-Walsh’s arguments would result in too narrow an interpretation of the obligations under the NPCAA. It was not necessary for the DHB to establish a breach of the Nursing Council professional competencies.
It weighed the duty of the DHB to report under HPCAA against the terms of the record of settlement under section 149 Employment Relations Act 2000.
It found the record of settlement was a full and final settlement of all matters arising out of the employment relationship but could not cut across the DHB’s statutory duty to notify the Nursing Council, so did not breach the confidentiality or the full and final provisions in the record of settlement.