MUTUAL SEPARATION AGREEMENTS IN EMPLOYMENT

Published by Tawajud Lwenduru.

A Mutual Separation Agreement is an Agreement entered into between an employer and employee setting out mutual terms and conditions of an employee’s termination from employment. In entering such an agreement, the employee waives his/her rights to seek a  court resolution with regards to any alleged impropriety that stemmed from the employment relationship and the employer as well waives any rights or claims against the employee.  This waiver of rights by both parties enables a “soft exit” of the employee.

The benefit of such an Agreement for a company is that an exit is negotiated without having to go through cumbersome disciplinary enquiries, incapacity hearings as well as any retrenchment processes. And the benefit of such an Agreement for an employee is that the employee will exit the company whilst having their reputation in place and the Mutual Separation Agreement will enable him/her to exit the Company with all his/her terminal benefits intact, even if they are terminated for misconduct.

The law of Tanzania acknowledges Mutual Separation Agreement under Rule 3(2)(a) of The Employment and Labour Relations (Code of Good Practice) G.N 42 of 2007, whereby it is provided that;

“Any termination of employment by agreement may be regarded as lawful termination.”

This was further emphasized in Rule 8 (2)(b) of The Employment And Labour Relations (Code of Good Practice) G.N 42 of 2007 which states that;

“Where there is no breach to terminate the contract, lawfully would be by getting the Employee to agree to an early termination”

 

It is a principal of contract law that, just as parties are free to enter into contracts, they are equally free to bring their contracts to an end by consensus. This principle is also applicable to contracts of employment.

The termination of a contract under the common law requires genuine mutual agreement of both parties and neither party may unilaterally change his or her mind after a valid mutual agreement is signed.

However, in order for a mutual separation agreement to be lawful and valid the following must be adhered to;

  1. The terms and conditions of the agreement must be fully understood by the employee and the details of separation must be properly explained;
  2. The agreement should be signed by both parties.
  3. The agreement must state that it is in full and final settlement of all obligations between the parties;
  4. The agreement must also state that the parties mutually agree to terminate the employment; and
  5. The employee must acknowledge that he/she entered into the agreement voluntarily and without duress and undue influence.

If an employee signs the agreement under duress or undue influence then the mutual agreement becomes automatically invalid. Duress or undue influence shall be present where the employee is threatened or forced to sign the agreement. The burden of proving the duress rests on the employee.

Mutual Separation Agreements are final and binding in nature, hence employers and employees are to tread carefully before concluding a Mutual Separation Agreement by negotiating the terms of the Agreement and ensuring that their respective interests are protected before finalizing the Agreement. If one is not conversant with how mutual separation agreements should be effected they should consult a qualified lawyer who can guide them through the process and ensure that all legal requirements are fulfilled to avoid any legal repercussions for what may be termed as unfair termination.