Employment relationships, settlement agreements and mandatory reporting

The resolution of employment relationship problems in a confidential, full, final and binding Record of Settlement is usual process. However, not all employees understand that while the agreement may resolve the employment relationship problem, an employer cannot be barred from a statutory obligation, such as a mandatory reporting obligation.

For many professionals, including teachers, lawyers, accountants and pharmacists and other medical professionals, an individual’s conduct and work performance is subject to regulatory supervision and oversight under Codes of Conduct and statutory complaint schemes. These are in place to ensure compliance with regulatory standards, competency and fitness for the required work. Most regulatory schemes will also include mandatory reporting obligations.

Within schools, the Education Act requires that if an employer has advised a teacher within 12 months before a resignation that it was dissatisfied with or intended to investigate any aspect of conduct or competence, it must report the matter to the Teaching Council. Similarly, it must immediately report if there is reason to believe there was serious misconduct.

In Perrott v Rotorua Boys High School Board of Trustees, the employee claimed that the Board had breached a confidential full and final employment settlement agreement, by providing a mandatory report to the Education Council. The settlement agreement contained a term that it “… confirms it has not commenced a formal competency or advice and guidance program.”

Mr Perrott also claimed that because the settlement agreement had stipulated that there was no competency issue, there could not be a disclosure. The Employment Relations Authority disagreed. It concluded that the Board could not contract out of the Education Act obligation to report. Similarly, the obligations of confidentiality which are set out in the settlement agreement could not oust the statutory reporting duty. Because the employer had raised competency issues, the mandatory report was required.

A similar outcome resulted in the case of Russ v Taihape Area School Board of Trustees. Mr Russ was employed in January to teach technology. During the year, the Principal raised several issues about his conduct and competency. These were set out in a September letter. Shortly thereafter, Mr Russ raised a personal grievance, and resolved matters by way of a confidential, full and final settlement agreement.

Of note in the settlement agreement were two terms: the first being an obligation not to make any statement about the other which is damaging or likely to damage the reputation of the other; and the second, an acknowledgment of the School’s obligation to undertake a mandatory report to the Education Council. The School subsequently filed a mandatory report.

The employee later challenged the School’s actions, including an allegation that the mandatory report breached the settlement agreement by inclusion of disparaging comments about Mr Russ, and by the inclusion of issues that went beyond the applicant’s competency.

In Russ v Taihape, once again, the statutory obligation on the employer to meet its mandatory reporting obligations was highlighted. The Authority noted the requirement set out in the Education Act, for the report to contain “a description of the conduct or competence issues that the employer was concerned about” and “a report of what action (if any) the employer took with respect to the issues.” The Authority held this did not prevent schools from reporting more widely than these matters. In this case, the Authority noted that there was no dispute that the report accurately conveyed the issues of conduct or competence. Ultimately, the employee’s claim failed.

Parties entering into settlement agreements should be clear about their rights and obligations. Careful drafting should ensure that there is no misunderstanding about the scope of the terms agreed, including confidentiality. Where a statutory reporting scheme is in place, an employer is not entitled to opt out of its legal obligations to report conduct of concern that has arisen. Employees will naturally want to ensure that the report is even handed. Given the potential for a mandatory report to trigger a professional standards investigation by a regulatory body, employees are wise to get good legal advice before signing any ‘full and final’ terms of settlement. Savvy employers will consider matters of timing; when reporting can and should be undertaken; and, the extent of information reasonably and fairly required within the report.