At the coalface: settlement signing and capacity (and the phone call afterwards)
This is a true story from employment mediation. Details have been changed and identifying facts removed. The lesson is simple: if you are not clear-headed, do not sign. Once a Record of Settlement is signed and certified, it is usually very hard to undo.
Record of Settlement in one minute
In New Zealand, employment disputes are often resolved at MBIE mediation. The written settlement document is commonly called a Record of Settlement. If the settlement is certified by a mediator under section 149 of the Employment Relations Act 2000, it is intended to be full and final, enforceable, and difficult to reopen.
Capacity in plain English
The person signing needs to understand the deal and be able to make a real choice. Capacity problems can be caused by many things: alcohol, cannabis, medication, extreme stress, exhaustion, language barriers, or mental health crisis.
Why it matters
- A settlement can end a Personal Grievance (PG) permanently.
- It often includes confidentiality, non-disparagement, and tax wording.
- If you later claim you did not understand, you will need strong evidence. Regret is not enough.
The story (details changed)
The employee was an adult. We were at settlement stage. The employer and employee were both tired of the dispute, and the terms were reasonable.
During the discussion, the employee mentioned they had smoked cannabis earlier. They were not falling over, but they were not sharp either. That is a risk point: if someone signs while affected, you invite a future argument that they did not properly understand what they were signing.
What we did in the room
- We slowed down and went clause-by-clause in plain English.
- We used a "teach-back" check: explain it, then ask the person to repeat the key terms in their own words.
- We made it clear a pause was available: "We can reconvene tomorrow."
- We documented the process carefully.
The employee still wanted to settle. We proceeded only after confirming understanding and voluntariness as best as you can in a practical setting. The settlement was signed.
The phone call afterwards
A day or two later I received an angry call from the employee's parent. They were furious that their adult son had signed settlement terms while "stoned". They wanted the settlement undone. They also wanted someone to blame.
Here is the blunt reality: the parent was not the party. The adult employee was. If an adult signs a settlement and later regrets it (or gets talked into regret by family), that does not automatically make the settlement invalid. The "Karen mother and stoned son" scenario is not the other side's problem.
I do not run an impairment interrogation before someone signs. Adults are responsible for turning up in a state where they can make decisions. My focus is a clean process: clear wording, time to think, confirmation of understanding, and no pressure.
The practical lessons
If you are the person signing
- Do not sign if you are affected (alcohol, cannabis, medication, lack of sleep, panic).
- Ask for time. A one-day pause is cheaper than years of regret.
- Make sure you understand "full and final". That is the point of settlement.
- If a parent or friend is pressuring you, pause. This is your decision, not theirs.
If you are negotiating the settlement
- Slow down and keep the process clean. No rush tactics.
- Use teach-back on the key terms (money, full and final, confidentiality, tax).
- Document the steps taken to confirm understanding and voluntariness.
- Keep communication with the actual party. Family members can create noise and regret.
What I do now, every time
- Plain-English summary of the deal (two minutes), then ask the person to repeat the key terms back.
- Make the pause option real: "We can reconvene tomorrow."
- Confirm the person knows it is full and final, and confirm they want to proceed.
- Written note of the steps taken, including who was present and what was explained.
If you want a settlement done properly, the theme is simple: slow down, make it clear, confirm understanding, and remove pressure.
If you want help with a settlement, a Personal Grievance (PG), or an Employment Relations Authority (ERA) matter, send a short timeline and the key documents.
Employee Case Form
Employment law news and opinion
