Mutual Separation Agreement in Context

“When separation is with mutual consent. Then in reality, there is no separation. It is just an illusion for public.” – Saanjh

Article by Wessel Brits (Senior Labour Advisor) and Nichole Turner (Senior Labour Advisor)

Introduction

Often employees find themselves having to make the difficult decision: whether to proceed with a disciplinary hearing, or to enter into a mutual separation agreement (MSA).

In a previous E-data article entitled “No agreement – No signature” we addressed the often encountered abuse of power exerted by higher management to evade formal disciplinary measures, pressuring employees to sign agreements tilted in favour of the employer, at the employees expense.

In today’s article, however, we discuss the benefits and consequences of why one would opt to elect an MSA.

What is a Mutual Separation Agreement?

A mutual separation agreement (“MSA”), envisages the termination of employment by mutual consent between the employer and the employee.

This is neither a resignation, nor a dismissal. It is a settlement, whereby, parties agree that the working relationship has broken down (for one reason or the other), to such a point that they would rather opt for an amicable separation.

Essentially, eliminating the mudslinging of a disciplinary hearing and parting ways, amicably.

The relevant terms and conditions, that govern the termination of employment, are negotiated, reduced to writing and signed by both parties. The agreement becomes binding, once consensus is reached and signed by both parties.

As such, such an agreement includes a waiver of rights by both parties to enable a “soft exit” of the employee.

When can a mutual separation agreement be utilised?

Employment relationships end due to a variety of different reasons, some may relate to: incompatibility, misconduct by an employee, or intolerable conduct by the employer towards the employee (a situation forming the basis of a constructive dismissal).

An MSA may be proposed and entered into at any point prior to the termination of employment. For example, during disciplinary proceedings, (prior to the rendering of a dismissal).

Benefits of a mutual separation agreement

The benefits of such an agreement may include avoiding the often-arduous disciplinary enquiry process. If done correctly, providing you with a watertight and risk free termination.

Meaning that you avoid a dismissal being recorded as the reason for termination, opting instead to sever ties with the company on “good terms”. The stigma attached to a dismissal ruling from a previous employer can hold significant weight, particularly when you are seeking new employment.

Disadvantages of a mutual separation agreement

Seek the assistance from a Labour Law expert when negotiating the terms for separation. Once an MSA is signed, the agreement is binding on the parties. Thus, if ill equipped, you may be placing yourself at a great disadvantage.

Too often, the emotional impact of the situation may lead to clouded judgement, pushing employees to settle on unfavourable terms, in the belief that it was the only option they had.

Unfortunately, once the agreement is signed, it is too late to renegotiate a new settlement; unless both parties agree to amend provisions of the agreement, and reduce the amended provisions to writing.

It is further to be noted that whilst you leave your employ on “good terms,” and you retain a “neutral record,” you will however, not be able to claim UIF benefits; unless parties agree to record that the reason for termination is due to the employee’s contract having expired (however, this would need to be substantiated by an official contract of that nature.)

Is such an agreement legally binding?

In contract law, when we say that the parties have reached a “mutual agreement” or there is “mutual consent”, we refer to the fact that the parties have reached an understanding that may be the basis of an oral or written contract.

The settlement becomes full and final, once the obligations of the parties are fulfilled. This means that an employee waives their rights to approach any courts, or tribunals such as the Dispute Resolution Centre (DRC) or Commission for Conciliation Mediation and Arbitration (CCMA) etc. regarding any alleged impropriety that stemmed from the employment relationship. In turn, the above is applicable to the company, as well.

Make sure!

• It is crucial for you to familiarize yourself with content and implications of the agreement (rather ask if you are unsure). If there is a language barrier, obtain the assistance of an interpreter.
• Invite a witness to be present when the content of the agreement is explained, and let the witness co-sign the agreement.
• Ensure that you enter into the agreement voluntarily and free of any duress.

Conclusion

It is important for an employee to know what they are signing and to ensure that they negotiate the best terms. Once a mutual separation agreement has been signed, it is done in full and final settlement and is binding on all parties.

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