Compromise Agreements: what are they?

31 07 2009

This is a fairly common question.   Basically a compromise agreement (aka termination or settlement agreement) is a legally binding contract between employer and employee whereby the employee accepts a financial package (usual elements include: compensation for loss of employment, notice monies, outplacement services provision, release of stock etc) in return for agreeing not to sue the employer for breach of contract, or unfair dismissal or for any discrimination related reason. The employee will also commonly agree to keep the agreement itself confidential and to say nothing about the employer’s trade secrets and affairs, amongst other requirements.  In order to be legally binding the employee needs to take independent legal advice on the terms of the agreement from a qualified legal adviser – usually a solicitor.  The employer will usually pay a contribution towards the cost of that advice to encourage the employee to get the advice.

 If you find yourself in this situation, it is important to seek advice from a solicitor that regularly deals with employment law regularly so that advice can be given to you on whether the offer should be accepted at all (i.e. do you have reasonable prospects of success with a claim for unfair dismissal) and, if the advice is to accept the offer in the agreement, are the terms of the agreement reasonable, or do they place too onerous a burden on the employee? Some compromise agreements I come across contain clauses that are illegal or, at least, unfair, and in many cases are too ambiguous. 

Usually the terms of the agreements can be renegotiated quickly and with a minimum of expense.  Overall, a compromise agreement is a very good way of settling legal disputes and they are not limited to use in redundancy situations, although that is where we most commonly some across them. 

Please click here to see a previous post on the same subject.

Please click here to see my most recent post.





Dale Langley & Co

29 07 2009

In my day job I am a Partner in the above firm. We have recently relaunched our website and have started a Dale Langley blog.  Initial comments have been favourable.  I have just posted an article on a case concerning compromise agreements and why you should not delay in negotiating the terms or signing off.  Please click here to go to the article.

I have also written on compromise agreements and what they are before – click here  to read more.

As ever, if you would like me to help please contact me at michaelscutt@dalelangley.co.uk





Further advice on swine flu

28 07 2009

Personnel Today, a very useful website for HR and employment law matters has published  an article on what steps employers can take – click here to visit it.

There are also RSS feeds so you should have no reaosn not to be fully up-to-date!





More on Swine Flu

28 07 2009

Well, since I jumped on the Swine Flu bandwagon with my post last week, I thought I better stay there for a bit longer. 

In that post I wondered just what precautions an employer could be expected to take to avoid the risk of being found liable to an employee for contracting swine flu at work (always assuming that it could be proven that the infection was picked up in the workplace).  My view then (and now) is not much, beyond promoting good hygiene and not insisting on ill employees coming into the office to spread their germs.   Business Link, the organisation for employers, has provided guidance on their website – click here to go to the site.

It’s all good stuff and makes a lot of sense from the real threat to employers – business continuity.  How do you run your business if half your staff are off ill?  That is the real concern; not the prospect of increased lawsuits.





Constructive Dismissal – recent developments

24 07 2009

This post isn’t about Freddie Flintoff bowling 5-92 to defeat the Aussies at Lords (a very constructive dismissal in my view) but, sadly, is about some recent cases on the law relating to constructive dismissal.  The recent case of Bournemouth University Higher Education Corporation v Buckland [2009] EAT whilst not being as newsworthy as this week’s actions at Lords is, nevertheless, important stuff on the difficult topic of constructive dismissal.  In my experience few topics cause as much confusion or are as overused as constructive dismissal.  Every second client thinks they have or are about to suffer it.

So, what is it about? The definition provided by the Employment Rights Act 1996 s.95(1)(c) is that constructive dismissal occurs when an employee “resigns in circumstances such that he is entitled to terminate his [contract of employment] without notice by reason of the employer’s conduct”. In other words the employer commits an act (or even fails to do something that he said he would) and the employee’s response is to resign in protest. The breach doesn’t have to be of an express term of the policy (like a failure to pay salary, for instance): implied terms can be breached and the usual one that gets raised with constructive dismissal is that the employer has breached the implied term of trust and confidence.

The employer must be said to have committed a repudiatory (i.e. fundamental) breach of contract – it must be more than just unreasonable behaviour by the employer: it just go to the heart of the employment contract.  This is called a WRONGFUL dismissal (which is NOT the same as an UNFAIR dismissal).  If the employee then resigns in response to this breach he is said to have ACCEPTED the repudiatory breach.  The contract is then discharged and the employee is free of all obligations under that contract.  On the other hand, if the employee doesn’t accept the breach or resigns over some unrelated issue he may be said to have AFFIRMED the breach.

For an employee claiming constructive dismissal is a big step.  The burden of proof is on the employee to (1) show that the employer was in breach, (2) that it was a fundamental breach, and (3) that he (the employee) resigned in response and (4) the employee mustn’t delay in acting.  Effectively the employee resigns and walks out without his notice monies or any other compensation because the employer won’t pay notice monies to an employee who walks out.   I often call it, perhaps rather melodramatically, the “nuclear option”. 

A constructive dismissal is not always an unfair dismissal. It will be if the employer cannot show a potentially fair reason for the dismissal. The ERA lays down five potentially fair reasons – (1) redundancy, (2) capability, (3) conduct, (4) frustration of contract and (5) some other substantial reason.  The employer needs to show that the action he took or threatened comes within one of these five categories. If he can’t then the dismissal is unfair.  If he can show that the reason for dismissal was within one of these categories then he must then prove that he (the employer) acted reasonably in relying upon that reason for the dismissal.

How is that established? The case of Buckland (above) dealt with this issue.  In most unfair dismissal cases before an Employment Tribunal the ET will be asked to consider whether employer’s actions were within the “band of reasonable responses” test – which is not where the ET decides what decision it would have taken if it had had to make that decision but whether the action the employer took was a reasonable response to the employee’s situation.  Buckland confirms that the band of reasonable responses test is NOT relevant in cases of constructive dismissal.  This has been an issue for some time in this area.  What is the relevance to employees?  This decision confirms that “mere” unreasonable conduct by the employer is not sufficient to establish constructive dismissal: there must be a breach of contract that goes right to the root of the employment contract and shows that the employer no longer wished to be bound by its terms.  This raises the bar for Claimants in an already difficult area.

The second recent case that grabbed my attention is Wishaw and District Housing Association v Moncrieff EAT.  It illustrates another aspect of the constructive dismissal situation: what if you don’t have one particular act or event constituting the repudiatory breach, but a series of events leading up to a “final straw”?  This case dealt with that issue and confirmed that the final incident has to be more than trivial.  The cumulative effect of all the breaches has to amount to a fundamental breach of contract. 

I would urge any employee contemplating claiming constructive dismissal to get legal advice as a matter of urgency before taking (of failing to take) any action.  Don’t rely on this post either!  Constructive dismissal is a complex subject and you need to look carefully at each case on its own merits before deciding what to do.





Swine Flu – should employers worry about being sued?

23 07 2009

Thanks to Annabel Kaye of Irenicon (@AnnabelKaye) for bringing the article in MailOnline to my attention, via Twitter.  The full article can be found at http://www.dailymail.co.uk/news/articles-1201371/Bosses-risk-lawsuits-staff-swine-flu  .  Apparently, according to the Mail, employers need to be getting worried about the risk of being sued by employees who catch swine flu from doing their jobs .  The article quotes  lawyers and other commentators who  point out the risk of increased litigation.

Whilst some employees may try it on and threaten their employers with claims in most cases they won’t get off the ground and, like Annabel, I don’t buy the need to panic. In her tweet she made the very cogent point that the employee would have difficulty in proving where they contracted swine flu.  For an employer to be at risk of being successfully sued for personal injury arising out of contracting swine flu at work, the employee will have to jump through the following hoops;

  1.  The employer was in breach of their duty of care to the employee in  not taking reasonable steps to reduce the risk of contracting the virus
  2. The employer’s breach of duty caused the employee to have swine flu
  3. As a result the employee suffered personal injury

 

Whilst there are undoubtedly steps that can be taken to minimise the risks of it spreading (like good hygiene practices) etc   the main reason why employers won’t be taken to the cleaners on this one is because of (2) above – causation.  How is an employee to prove that they contracted the virus at work as opposed to on the train/tube/bus or the gym or from the kids (or the kids’ friends) or the other parents waiting at the school gates, shopping mall etc?  The list of potential sources is endless.  Just because a customer/colleague might sneeze in your general direction (try saying with a French accent for the full Monty Python effect) will not be enough to persuade a wizened County Court District Judge to enter judgment.   

I am also sceptical about what steps an employer can take to reduce the risk – providing soap/antibacterial gel in offices and cleaning phones and keyboards are about the only steps I think an employer can reasonably be expected to take.  Getting staff to work from home might not be possible – for how long?  I’m all for flexible working practices where reasonably required but how long do you send staff home for – months?  Separating desks – so what?  (why do I keep thinking of the Titanic’s deck chairs?) ; switch off the air-con? Now you’re talking, let’s hope we don’t have a heat wave.  A court asked to consider the issue of breach of duty (1) above will want to consider what steps an employer could reasonably have taken to reduce the risk. That won’t include taking steps that will shut the employer’s business down.

 Finally, even if an employee could overcome the first two hurdles, the amount of compensation they would receive for an unpleasant illness that lasted a week/ten days would not be great, probably not more than £1000, which is the minimum limit for Claimants recovering their legal costs plus compensation in the County Court, below that the cases aren’t financially viable for lawyers to get involved. If someone developed secondary problems consequent upon the swine flu then the level of compensation might be higher, but it is all very tenuous.  For this reason the no win no fee merchants won’t get involved.   If a privately paying client came to me and said they wanted to sue their employer because they got swine flu I would tell them to think again, and carefully.

I don’t want to seem flippant about swine flu, or underplay the risk it poses.  It is clearly, for some people, a very nasty, indeed fatal, illness.  But, as Corporal Jones used to say “Don’t panic” and articles such as this one in MailOnline only serve to whip up anxiety, but that’s what the Daily Mail is for, isn’t it?





The silly season is well and truly upon us

17 07 2009

Continuing in the same vein as my last post, here is an article that caught my eye in Telegraph Online today – http://www.telegraph.co.uk/news/newstopics/howaboutthat/5718984/Staff-strip-naked-to-improve-morale.html

How on earth stripping off in front of one’s colleagues can improve morale I don’t know, but then I suppose I’m not a “business psychologist”. 

Perhaps the prospect of bearing all for the 5 1/2 people watching Virgin Channel 1 helped them to shed their garments?

Moustaches, nudity, what next? England have got Australia at 29-2 at lunch on the second day after being bowled out for 425.   Yep,  the world has gone mad.

It’s got to be said it’s all much more interesting than Age Discrimination and the Information and Consultation of Employees regs.  Keep it coming!