Charles Price
Thursday 17th April 2014

PRECEDENTS

Compromise Agreement

This precedent is only for academic use only

An agreement to refrain from intiating proceedings in an employment tribunal

This Agreement is made between [XY (hereafter referred to as the Employee or Applicant, or as the case may be])] and [ABCLtd (hereafter referred to as the Company [or ˜Respondent, or as the case may be])]

It is agreed between the parties as follows:

1. The Company will pay to the Employee the sum of [£12,000] within [12days hereof] or as the case may be].

2. The Employee will refrain from [instituting a complaint against the Company before an employment tribunal] [or continuing his complaint against the Company before the employment tribunal under Case No [specify]] in respect of his allegation that on [date] the Company:

(give sufficient details to identify the particular complaint under each generic head or legal reference);

dismissed him unfairly; and/or made an unlawful deduction from his wages by

discriminated against him/her on the grounds of race or sex ; and/or

took action short of dismissal against him relating to his trade union membership or activities by (give sufficient details to identify the particular complaint);

[3. The Employee accepts the payment made by the Company in full and final settlement of all other claims which he has or may have against the Company arising out of his employment or the termination thereof, being claims in respect of which an employment tribunal has no jurisdiction [except any claims for damages for personal injury or as the case may be].

[The contents of this Agreement are to remain confidential other than the fact of the existence of the Agreement. This clause does not apply to [name] the Claimant's spouse]

[The Respondent agrees to provide the attached reference to any potenial employer of the Claimant who requests a reference]

4. The Employee acknowledges that, before signing this Agreement, he received independent legal advice from (name of adviser), [a qualified lawyer or certified union official or certified advice centre worker, as the case may be]5, as to the terms and effect of this Agreement and in particular its effect on his ability to pursue his rights before an employment tribunal.

5. The conditions regulating compromise agreements under the [Employment Rights Act 1996 and/or Sex Discrimination Act 1975 and/or Race Relations Act 1976 and/or Trade Union and Labour Relations (Consolidation) Act 1992 and/or Disability Discrimination Act 1995 are satisfied in relation to this Agreement.

(Signed)
(Employee/Applicant): Date:
(Employer/Respondent): Date:

NB. It might be worth reading my following article on the new Hinton case before drafting a Compromise Agreement:
HINTON (appellant) v. UNIVERSITY OF EAST LONDON (respondents) [2005] EWCA Civ 532 2005] IRLR 552


The latest Court of Appeal case regarding compromise agreements warns drafters against taking shortcuts. In this case the meaning of, s.203(3)(b), of the Employment Rights Act, the requirement that, the agreement must relate to the particular proceeding.

The Claimant, a university lecturer took early retirement from his post under an agreement which included a provision purporting to compromise all claims against the university. The agreement was intended to satisfy the conditions relating to compromise agreements set out in s.203 of the Employment Rights Act.

What it Said in the Agreement

Under clause 11, the Claimant agreed to refrain from instituting or continuing proceedings before an employment tribunal in relation to any claims or complaints compromised under clause 9.

Clause 9 in the agreement provided the following, This agreement is made without any admission of liability on the part of the university on the basis that its terms are in full and final settlement of all claims in all jurisdictions (whether arising under statute, common law or otherwise) which the employee has or may have against the university officers or employees arising out of or in connection with his employment with the university, the termination of his employment or otherwise including in particular the following claims which have been raised by or on behalf of the employee as being claims which he may have ...

There then followed a seemingly extensive list of 11 particular kinds of claim under the Employment Rights Act and under the discrimination statutes and at common law.

Following the termination of his employment, Dr Hinton instituted tribunal proceedings against the university under s.47B (the Employment Rights Act, relating to the right of a worker not to be subjected to a detriment by his employer by reason of his having made a protected disclosure). The University contended that pursuing such a claim constituted a breach of the compromise agreement. The Employment Tribunal concluded that s.47B was not mentioned in the particular itemised claims listed in the agreement and therefore, the agreement was badly drafted and could not be construed as having the effect of excluding the particular complaint now brought by the Claimant.

The EAT was satisfied that s.47B fell within the general words at the beginning of clause 9 and allowed the appeal. The EAT deemed the list which followed as illustrative only of the type of claim to be compromised.

On appeal, it was submitted by the Claimant that the potential claims made by the Claimant should be expressly particularised either by reference to the nature of the claim or by reference to the relevant statutory provision if they were to be compromised and that a purported catch-all clause as seen in Clause could not satisfy the requirement alone. The Respondent argued that for an agreement to relate to the particular proceedingswithin the meaning of s.203(3)(b), it was not necessary for express claims to be particularised in order to be compromised, as long as they fell within the contractual scope of the agreement.

The Court of Appeal held that the EAT had erred in allowing the employers to appeal against the decision of the employment tribunal. The employment tribunal had not been wrong in holding that a compromise agreement expressed to be full and final settlement of all claims in all jurisdictions (whether arising under statute, common law or otherwise) which the employee has or may have against the university ... including in particular11 kinds of claims which were then itemised, did not prevent the claimant from pursuing a complaint, which had not been listed, namely s.47B of the Employment Rights Act.

The requirement in s.203(3)(b) of the Employment Rights Act that, in order to constitute an effective compromise, an agreement must relate to the particular proceeding, must be construed as, requiring the particular proceedings to which the compromise agreement relates to be expressly identified. The appeal would therefore be allowed.

This decision sends a warning that when drafting compromise agreements only a ˜belt and braces approach will do if an agreement is to compromise all potential claims. The agreement should name sections within particular statutes. Mummery LJ, giving the leading judgment stated that a compromise agreement must specify the particular statutory claim being compromised or at the very least, the factual basis of the claim (para. 22). It is not sufficient to identify the proceedings only by reference to the statute under which they arise. In addition, or alternatively, the Claimant should give a generic name for the type of claim to be precluded such as, ˜unfair dismissal.

For an alternative means of settlement, where an ACAS conciliation officer has "taken action under section 18 of the Employment Tribunals Act 1996", a COT3 form of settlement may be used to preclude further claims (see ERA 1996 s.203(2)(e).

 

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