​How to settle workplace conflicts without litigation

Employment disputes do not always have to end in litigation.

In many cases, a well-negotiated settlement agreement offers a more efficient, discreet, and commercially sensible resolution.

From an employer’s perspective, the decision to settle is often driven by practical considerations, such as litigation costs, reputational exposure, management time, and the risk of disclosing confidential or sensitive company information in open court.

 

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To navigate this process effectively, there are several key issues to take into consideration.

Firstly, employers should always use “without prejudice” communications. Settlement discussions, whether they occur in meetings, emails, or draft agreements should be conducted on a “without prejudice” basis.

This allows parties to negotiate freely without fear that concessions or proposals will later be used against them in court if discussions break down.

In tandem with this, it is crucial to encourage independent legal advice. To reduce the risk of future challenges, employees should be encouraged to obtain independent legal counsel before signing a settlement agreement.

While negotiations may continue even if the employee elects not to instruct a lawyer, it remains good practice to include a confirmation clause stating that the employee had the opportunity to seek legal advice but chose whether or not to do so.

Further, parties must be mindful of limitation periods. Certain employment claims are subject to strict statutory time bars.

For example, claims under the Public Officers Protection Act (POPA) or state limitation laws.

Therefore, it is helpful to set clear deadlines for accepting or rejecting settlement offers to avoid the risk of claims becoming statute-barred during prolonged discussions.

In situations with very short limitation periods (such as the 3-month window under POPA), filing a protective or preemptive claim may be a prudent step.

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In addition to managing timelines, a strong settlement agreement must clearly address the commercial terms. This means clearly documenting all agreed financial and practical terms, which typically include the settlement or severance sum. This should feature a clear breakdown covering salary in lieu of notice, unpaid wages, accrued leave, allowances, and severance or gratuitous payments.

Along with these amounts, the agreement should outline the tax treatment of the sums payable, including whether any gross-up applies. It should also cover the return of company property and access credentials, as well as post-termination obligations such as confidentiality and restrictive covenants.

Finally, employers must ensure clear acceptance and finality. Acceptance of settlement terms should be clear, unequivocal, and thoroughly documented. It is standard practice to implement the settlement only after the agreement has been fully executed by both parties. Ultimately, a well-drafted waiver and release clause is essential to ensure finality and prevent either party from resurrecting settled claims in the future.

When negotiated in good faith and properly drafted, settlement agreements offer employers and employees a sensible alternative to protracted employment litigation, allowing both parties to move on and preserve the relationship.

 

 

 

Jamiu Akolade, MCIArb, is the Founder of The Employment and Labour Lawyers Association of Nigeria (ELLAN), Member Management Committee of the African Labour Law Society and the Author of The Employment Law Handbook.