Introduction
A Mutual Separation Agreement (MSA) is an agreement to end an employment relationship on mutually acceptable terms and conditions between an employer and an employee. An MSA can be used as a dispute avoidance device because its primary objective is to bring an employment relationship to an amicable end in a manner that aims to extinguish any potential claim for unfair termination or dismissal.
Whereas MSAs are not expressly anchored in the Employment Act, they are grounded in contract law as stated in Godfrey Allan Tolo v Tobias O. Otieno & Another [2022] eKLR where the Court held that:
“It is an established principle of law of contract that parties to a contract, including a contract of employment, can terminate their relationship voluntarily through mutual agreement. It means therefore that what the parties can voluntarily enter into mutually, they can also walkout of the same voluntarily by consent and upon agreed terms.”
The conduct of the employer and employee throughout key aspects of the negotiations is critical to ensuring that an MSA is not invalidated or used against an employer in unfair termination or dismissal proceedings. We have some recommendations on how to navigate such circumstances.
Before Negotiations Commence
It is ideal for negotiations relating to entering an MSA to be initiated by the employee as opposed to an employer. This waters down any potential claims for unfair termination or dismissal. Regardless of whoever initiates discussions relating to a possible MSA, any person representing the employer in such negotiations must obtain prior internal approvals and authority to participate in the discussions. This is noting that the intended effect of an MSA is to vary and/or terminate an existing employment contract.
Once Negotiations Commence
It is advisable to hold any negotiations regarding the execution of an MSA on a without prejudice basis. This is considering that it is not guaranteed that discussions may be successful. Furthermore, it is imperative that an employer’s conduct is not construed to amount to undue influence or coercion on an employee involved in the negotiations as this may be used as a ground by a Court to invalidate any resultant MSA entered by the parties. It is therefore advisable to enter such negotiations with both parties being represented by independent legal advisors.
Whereas an agreement may appear certain, or discussions have been largely positive, an employer should not announce the exit of the employee or replace the employee before an MSA has been signed. Such action may be deemed to constitute coercion as was held in the case of Pauline Wangeci Warui v Safaricom Limited [2020] eKLR where the Court observed as follows:
“Under such circumstances, there was no way the Claimant could insist on remaining in the employment of the Respondent as she had already been replaced even before she signed the mutual separation agreement. She pretty much had no option as she had literally been thrown out of her office based on her uncontroverted evidence that the Respondent has alluded to.”
After Negotiations
If parties are unable to agree on the terms of an MSA, the negotiations may be terminated with the relationship between the parties continuing as guided by applicable laws and the employment agreement. It is recommended for an employer to use the negotiations as an opportunity to implement appropriate remedial measures in circumstances where an employee has disclosed certain grievances.
On the other hand, if parties agree to execute an MSA, it is important that such terms of agreement are clear and are not deemed to be against public policy.
Furthermore, the resultant MSA should be in writing, signed by both parties and preferably witnessed by an independent third party. Parties should also ensure that once an MSA is executed all its terms are adhered to. This is based on the principle that parties are bound by the terms of their contract. In Mr. Wade Anthony Miller v Keystone Project Management Pty Ltd-Wade Hastie FWC 560, the Court found that despite an MSA not being formally executed by the employee who had instituted unfair termination proceedings, there was still a valid agreement to that effect because the parties had mutually acted as per the terms of the unsigned MSA.
Conclusion
An employee may still claim unfair dismissal or termination even after signing an MSA. The onus is for the employer to ensure that such an agreement is one that can withstand the test of judicial scrutiny. When used appropriately, MSAs may insulate both an employer and employee from the attendant costs and anxiety of Court proceedings. However, a blanket application of MSAs may not always be appropriate. It is therefore advisable to seek legal advice when considering entering negotiations relating to a possible MSA.