New Zealand is set to introduce a framework that would allow employers and employees to end contracts by mutual agreement, a move taking inspiration from the UK’s long-standing “protected conversations” regime.

Terminations in New Zealand have long posed challenges for employers, as release agreements are not enforceable. Instead, for the parties to agree to waive future claims, there must be an active dispute underway, and the parties must enter into a formal record of settlement agreement, which must be filed with the Ministry of Business, Innovation and Employment. A mediator is then assigned to determine whether the agreed terms are legally valid, enforceable and that the parties are fully informed concerning them, confirming:

• it has been explained to the parties that:
  • once signed, the terms are final, binding and enforceable;
  • the terms may not be cancelled for repudiation or misrepresentation, or cancelled once affirmed; and
  • the agreement cannot be subsequently challenged before the Employment Relations Authority or courts (except for enforcement), and
• no party has given up minimum entitlements in making the agreement.

There are many situations, however, where both parties may wish to explore a mutual termination option without an active dispute. The proposed reforms are intended to address this type of situation, enabling employers to initiate discussions of potential mutual termination of the employment agreement.

The UK has a similar, long-standing system...

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