Section 149 settlement agreements: the drafting trap
This page is a short practical warning about s 149 settlement agreements and a drafting conflict that can create an avoidable dispute later. I anonymise the parties and focus on the s 149 process and internal consistency.
What this is about
Section 149 of the Employment Relations Act 2000 allows parties to record a settlement and have a mediator sign it. The mediator must be satisfied the parties understand the effect of the settlement. It is not just a box to tick.
The problem: a clause conflict
The issue was essentially this:
- Clause 1 (condition / gateway): drafted so the settlement required mediator sign-off under s 149 as a mandatory step.
- Clause 11 (incongruent term): drafted in a way that did not sit with Clause 1. It read as if the document could operate on a different basis, creating ambiguity about when and how the settlement became effective.
When a draft contains an internal contradiction like that, it is not "fine because everyone knows what we meant". It becomes a problem the moment the parties disagree about enforcement, effectiveness or what obligations were intended to operate before mediator sign-off.
Why this matters in practice
Settlement documents can look routine, but small drafting conflicts can have significant consequences. If the parties later disagree about whether the agreement was binding, conditional or capable of enforcement, an internal inconsistency can turn a settlement document into a new dispute.
In this matter, I ultimately had to address the drafting conflict through submissions in the ERA. The core point was simple: if mediator sign-off is mandatory, the entire draft needs to be consistent with that reality. You cannot draft a gateway condition in one clause and then slip in an incongruent clause that undermines it.
Practical checklist: s 149 drafting sanity checks
If you are offered a settlement agreement that is supposed to be a s 149 agreement, check these before you even argue about money:
- Is the mediator sign-off actually mandatory? If yes, the agreement should clearly state it is not effective until signed by the mediator (or clearly define what is effective before sign-off, if anything).
- Do the "effective date" and "conditions" align? Look for conflicts between "binding on signing" language and "subject to mediator sign-off" language.
- Are there any clauses that bypass the gateway? Watch for release, non-disparagement, confidentiality, or repayment clauses that kick in even if the s 149 step is not completed.
- Is there a clean process section? Who drafts the final? Who sends it to the mediator? What happens if a party delays or refuses to attend the mediator sign-off?
- Independent advice language: If the document says "get advice before signing", make sure it makes sense in a two-step signing process (terms first, mediator sign-off after).
My take
If you are drafting employment settlement agreements, do better. If you are signing one, slow down. A settlement is meant to end a dispute. Bad drafting keeps it alive.
If you are dealing with an unjustified dismissal or redundancy process and want to talk strategy, you can start here:
Next step if your employment issue is active
If you are dealing with an unjustified dismissal or redundancy process and want to talk strategy, start here:
