Guiding You Forward

The Value of Compromise Agreements

A recent EAT hearing in March 2014 considered the question of whether or not they could hear a claim for Unfair Dismissal where the claimant had signed a compromise agreement  when her employment had been terminated by reason of redundancy in 2012. This case reminds employers of the importance of clear, sequential paperwork when managing a redundancy process and if possible the use of ‘compromise agreements’ to protect the employer from potential litigation into the future.

 

ISSUES:

  • A preliminary issue was raised by the respondent as to whether the Tribunal had jurisdiction to hear this case as the claimant had been paid an ex-gratia payment on top of statutory redundancy and had signed a disclaimer in respect of any potential claims to the Tribunal.
  • The claimant was represented by her Trade Union during discussions about the ex-gratia payments and she was given time to consider the package and disclaimer before signing it.
  • The claimant was also given the option of alternative employment within the company.
  • The claimant was informed that she could seek legal advice in relation to the disclaimer if she so wished.
  • It was the respondent’s position that the Tribunal had no jurisdiction to hear this claim as the claimant had signed a disclaimer of her own volition having been properly advised by her union representative.

 

LAW:

  • Unfair Dismissals Acts 1977 to 2007

 

APPLICATION OF THE LAW:

  • The claimant contended that in June 2012, she was already dismissed by way of redundancy (and was paid statutory redundancy) before she later accepted the ex-gratia payment and signed the disclaimer.
  • Initially she understood that the ex gratia payment was not dependent on her signing the disclaimer however this was not the case.
  • She gave evidence that she believed that she ultimately had no choice but to sign the disclaimer and accept the ex-gratia payment.
  • She does not believe that her union representative told her that there was the possibility of alternative employment available nor did he explain the terms of the disclaimer to her fully. It was also her contention that she was told by the union representative that she had to take this or she would get nothing. The claimant was under financial pressure at the time and felt she was “backed up against a wall”.
  • It was acknowledged by the claimant that she choose not to seek legal advice on the matter before signing the disclaimer in July 2012.

 

CONCLUSION:

  • In this case the Tribunal examined the various correspondence issued to the claimant in relation to the redundancy, the disclaimer and the ex gratia payment, in particular the letter dated 12th July 2012 attaching the disclaimer.
  • The disclaimer seeks to enter into an agreement that would essentially settle any potential claim the claimant might have in future in relation to her employment with the respondent and provides for an enhanced redundancy package.
  • It sets out the legislation a possible claim could arise under and advises the claimant to take independent legal advice in relation to the matter.
  • It appears that the claimant initially refused the ex gratia payment and took her statutory redundancy only in early June 2012 as she believed she should not have been made redundant. The respondent allowed her a second opportunity to accept the ex gratia payment in July provided she sign the disclaimer.
  • The Tribunal believes that the claimant had an adequate opportunity to consider the terms of the disclaimer and adequately inform herself of the consequences of accepting it.
  • The terms of the disclaimer are quite clear and are set out in plain English.
  • Furthermore, the claimant told the Tribunal that she was aware that it said she could take independent advice but she chose not to (albeit because she indicated that she could not afford a solicitor.)

 

While it is not an ideal position to be in for any employee the Tribunal believes that the claimant had an opportunity to adequately consider her position. Having refused the ex gratia payment initially it was offered again to her by the respondent some weeks later which in reality the respondent did not have to do.

The Tribunal believes that it has no jurisdiction in this claim due to the agreement between the parties dated 21 July 2012 discharging any future claim that might arise against the respondent. Accordingly the claim under the Unfair Dismissals Acts 1977 to 2007 must fail.

 

Case No:              UD191/2013

Source:                www.workplacerelations.ie

 

If you would like further information on redundancy procedures, please contact Aspire HR on +353 (0) 86 8782557 or email info@aspirehr.ie
For further information on the range of our HR Services see www.aspirehr.ie/our-services

 

Please note: ©Aspire HR. This document is intended to be a general guide only. You should seek professional advice if you are implementing a redundancy procedure.