Mutual Separation Agreements: The Good, the Bad and the Ugly

Abstract

The highest court has accepted the validity of terminating an employment relationship by means of a mutual agreement between an employer and an employee. These agreements are known as mutual or voluntary separation agreements or mutual termination agreements (MSAs). This type of termination of employment neither constitutes a dismissal, nor is it a resignation. Termination of employment by way of MSAs has several potential benefits, including that it decreases the number of referrals of labour disputes, and it is possible that the employment relationship can be terminated amicably on terms that are agreeable to both the employer and employee and in a manner that maintains and protects the reputations of both parties. However, signing an MSA means that the employee waives certain rights: the right to receive unemployment benefits, and the right to refer a labour dispute in terms of the employment contract for resolution. Employees may also be forced or coerced into agreeing to terms and conditions that they would not otherwise agree to, or be misled into signing an MSA, as is evidenced by the cases referred to the courts. It is also possible for employers to abuse MSAs. They can, in instances where the labour legislation sets prescriptions that must be followed, attempt to bypass the prescribed procedures. Although MSAs have been recognised by South African courts, there is no clear legislation or Code of Good Practice to guide their use, nor is there academic literature that examines how MSAs operate in practice or the risks they may pose. This article addresses that gap by analysing relevant case law and legal doctrine to highlight areas of uncertainty and concern, offering guidance to help employers and employees navigate the negotiation of MSAs more safely and responsibly.