Signed, but not settled: When settlement agreements do not end the story

In the Labour Court matter of Gottlieb and Others v Procure Genii, five former employees challenged their dismissals and sought reinstatement or compensation. The employer raised a preliminary objection, arguing that the dispute had already been settled through a prior agreement at the CCMA, and was therefore barred by the legal doctrines of res judicata and lis pendens. The Labour Court was asked to determine whether the settlement agreement had indeed resolved all claims or merely a portion thereof.

This judgment offers valuable insights into the interpretation of settlement agreements, the scope of compromise, and the importance of clarity in dispute resolution processes.

Legal implications

Mischaracterisation of legal pleas

The employer argued that the matter was res judicata (already judged) or lis pendens (pending elsewhere). However, the court clarified that:

• Res judicata requires a final judgment by a competent court on the merits.
• Lis pendens requires pending litigation between the same parties on the same cause of action.

Neither applied here. There had been no final judgment, nor was there pending litigation in another forum. The employer had, in fact, mischaracterised its plea. What it was truly arguing was that the parties had reached a compromise, a settlement agreement that extinguished the dispute.

Scope and interpretation of the settlement agreement

The court applied the parole evidence rule, which generally prohibits the use of external evidence to contradict the terms of a written agreement. However, it allowed evidence to clarify the nature of the dispute that the agreement intended to settle.

The settlement agreement stated that it was in “full and final settlement of the dispute referred to the CCMA” and of “statutory payments due to the applicant.” The court examined the initiating documents and found that:

• The dispute referred to the CCMA (case KNDB 9750-21) was primarily about severance pay.
• Although the applicants had initially raised unfair dismissal claims, they did not persist with those under that case number.
• The applicants later referred a separate dispute concerning unfair dismissal to the CCMA and ultimately to the Labour Court.

The court concluded that the settlement agreement only resolved the severance pay claim and did not compromise the applicants’ broader claims, including unfair dismissal and other statutory entitlements.

Employer’s conduct and costs

The court found that the employer was aware of the ongoing dispute in the Labour Court at the time of signing the settlement agreement. A clause in the agreement explicitly stated that the UI-19 forms provided to the applicants were solely for UIF claims and “not to be used in any other forum.” This indicated the employer’s awareness and concern about the Labour Court proceedings.

Given the lack of evidence supporting the employer’s claim that the settlement covered all disputes and the opportunistic nature of the preliminary objection, the court awarded costs against the employer.

Key takeaways

For employers

• Be precise in settlement agreements: Clearly define which disputes are being settled. Ambiguity can lead to continued litigation.
• Understand legal doctrines: Res judicata and lis pendens have specific requirements. Misusing them can backfire.
• Avoid opportunistic litigation tactics: Courts may penalise parties who raise weak or misleading preliminary objections.

For employees

• Document your disputes carefully: Ensure that each referral to the CCMA or court clearly outlines the nature of the claim.
• Do not assume all claims are settled: A settlement agreement may resolve only part of your dispute. Seek legal advice before signing.
• Challenge overreach: If an employer tries to use a settlement to block unrelated claims, the courts may side with you.

For legal practitioners

• Apply the parole evidence rule correctly: Use it to interpret, not contradict, the written agreement.
• Clarify the scope of compromise: Ensure clients understand what is being settled and what remains open.
• Prepare for scrutiny: Courts will examine the context, documents, and conduct of parties when interpreting settlement agreements.

Final thoughts

This case is a reminder that not all settlements are created equal. A “full and final” clause may sound definitive, but its scope depends on what was actually referred and intended to be resolved. Employers must be cautious not to overextend the reach of a settlement, and employees must be vigilant in preserving their rights.

The Labour Court’s decision reinforces the principle that fairness and clarity must guide dispute resolution. A settlement should bring closure, not confusion.

For advice or more information, please contact Riona Kalua, head of our Labour and Employment team.