It has many names but it amounts to the same thing.
The employment is being terminated and the employee is being asked to sign some type of agreement and enter into another contract with the employer.
I see a lot of these agreements on a frequent basis in my office, especially now with the Covid 19 pandemic and the move by employers to carry out redundancies and cut costs.
What is involved in this type of agreement?
What is the big decision the employee has to make?
These are the questions I will address in this piece. Let’s take a look, shall we.
What’s in the agreement?
The agreement itself will almost certainly be a standard agreement which will be adapted for the particular employee and the package being offered; but the same types of matters are dealt with in all these sorts of agreements.
The following will be included:
Definitions of words and phrases in the agreement
Termination of the employment
The termination payment, and other payments
The tax treatment
Legal advice-provision for the employee to get legal advice regarding the agreement, and provision for payment by the employer of the legal costs of obtaining the advice
Pension (if any)
Health insurance (if any)
Outplacement services (if any)
Return of company property
Release and settlement of any issues or claims arising from the employment
Non disparagement by the parties
Reference or statement of employment
Applicable law-Irish law
The proposed settlement/severance agreement will me marked “without prejudice/subject to contract” until executed and witnessed by both parties.
The big question
So, now that you know what is usually contained in these agreements what is the big decision for the employee, particularly in a redundancy situation?
Let’s take a look at a redundancy, although the same type of logic and decision making will need to be applied in other termination circumstances.
The employee is going to be offered a payment by the employer, in return for which the employee is going to sign this agreement and waive all her rights to bring any claim arising from the employment.
The agreement will make provision for the payment of a statutory redundancy payment, to which you are legally entitled, and the payment of an “ex gratia” payment, which is at the discretion of the employer.
The employee may believe, for example, that a) it is not a genuine redundancy or b) she is being unfairly selected. If that is the case and she wishes to pursue the matter at the WRC (Workplace Relations Commission) she will be bringing a case for unfair dismissal. If she wishes to do so, however, she will be refusing to sign the agreement and passing up any “ex gratia” payment proposed by the employer.
If the employee signs, she gets both payments. If she refuses to sign she is still made redundant but only gets the statutory redundancy payment.
This decision needs to be considered carefully.
Yes, he might win at the WRC, but if he does will he win more than he has foregone by refusing to sign the agreement? Is he prepared to wait the 6 months for a hearing, and then pay for the legal costs of representation?
If it is an unfair dismissal claim the employee may win reinstatement or reengagement, but this is unlikely and the relationship between the employer and employee may be strained or broken.
On the other hand if the employee was to win a claim for discrimination he could be awarded up to two years’ salary. So, each case must be looked at on its particular facts and circumstances.
These are the factors the employee must consider when making the big decision to sign or refuse to sign the agreement.
But the bottom line is simple.
On the one hand the employee is being offered a payment to leave the employment quietly and with no fuss; in return he is giving up his rights to bring any claims in the future arising from the employment.
The employee needs to get legal, and probably taxation, advice about any termination agreement he is being asked to sign. Because once she signs the agreement it is probably going to be effective in doing its job to prevent the employee from bringing any further claims against the employer.
There is a straightforward cost/benefit, risk/reward analysis to be done by the employee when it comes to sign or not sign such an agreement.
Want to roll the dice and put all your chips on red/black? This is the stark decision you face. Weigh it up carefully. If you do sign it will probably bind y0u.
Here is a recent example of one such case where the employee signed an agreement but later claimed it was only signed under duress. The WRC did not accept this and held the agreement was effective and binding on the parties.
Does force majeure leave offer any relief to employees in the current Covid-19 crisis?
Or does it create even more problems for employers who are already concerned about the many implications arising from the spread of the virus in Ireland?
Force majeure is defined as a “superior force” and is afforded statutory recognition in Irish law in the Parental Leave act 1998 as
13.—(1) An employee shall be entitled to leave with pay from his or her employment, to be known and referred to in this Act as “force majeure leave”, where, for urgent family reasons, owing to an injury to or the illness of a person specified in subsection (2), the immediate presence of the employee at the place where the person is, whether at his or her home or elsewhere, is indispensable.
(2) The persons referred to in subsection (1) are—
(a) a person of whom the employee is the parent or adoptive parent,
(b) the spouse of the employee or a person with whom the employee is living as husband or wife,
(c) a person to whom the employee is in loco parentis,
(d) a brother or sister of the employee,
(e) a parent or grandparent of the employee, and
(f) persons of such other (if any) class or classes as may be prescribed.
(3) When an employee takes force majeure leave, he or she shall, as soon as reasonably practicable thereafter, by notice in the prescribed form given to his or her employer, confirm that he or she has taken such leave and the notice shall specify the dates on which it was taken and contain a statement of the facts entitling the employee to force majeure leave.
(4) Force majeure leave shall consist of one or more days on which, but for the leave, the employee would be working in the employment concerned but shall not exceed 3 days in any period of 12 consecutive months or 5 days in any period of 36 consecutive months.
(5) A day on which an employee is absent from work on force majeure leave in an employment for part only of the period during which he or she is required to work in the employment on that day shall be deemed, for the purposes of subsection (4), to be one day of force majeure leave.
Force majeure clauses in employment contracts
Some executive type contracts of employment may contain a force majeure clause, and most employment contracts will refer to the statutory relief provided for force majeure in the Parental Leave Act 1998.
A force majeure clause will usually have the effect of suspending the obligations of one or both parties in certain exceptional circumstances. That is to say, events like storms or earthquakes or other acts described as “acts of God” may qualify as force majeure events as envisaged by the contract.
However, there is no presumption in Irish law of a force majeure event, thus the parties need to specify what events are intended to be covered by the force majeure clause. Without this clarity the clause may be unenforceable on the grounds that it is void due to the uncertainty and lack of clarity around it.
The precise scope of the force majeure provision will depend on the context in which it is used: ‘A force majeure clause should be construed in each case with a close attention to the words which precede or follow it, and with a due regard to the nature and general terms of the contract. The eﬀect of the clause may vary with each instrument.’ (Lebeaupin v Crispin  2 KB 714)
Is Covid-19 a force majeure event?
It is worth noting that the phrase force majeure has no recognised or widely accepted meaning in English law.
The question, therefore, of whether Covid-19 is a force majeure event is a question that will almost certainly be determined by the particular circumstances of the contract and what was envisaged, what type of work was involved, whether performance of the contract was genuinely prevented by the coronavirus, and so forth.
The “force majeure event” should be defined in the force majeure clause in the contract. For example:
“Force Majeure Event” means an event, or a series of related events, that is outside the reasonable control of the party affected (including power failures, industrial disputes affecting any third party, changes to the law, disasters, explosions, fires, floods, riots, terrorist attacks and wars).
If a dispute arises, however, it is likely that a Court will interpret the clause strictly and narrowly.
Force majeure clause examples
Each Party shall be excused from liability for the failure or delay in performance of any obligation under this Agreement by reason of any event beyond such Party’s reasonable control including but not limited to Acts of God, fire, flood, explosion, earthquake, or other natural forces, war, civil unrest, accident, any strike or labor disturbance, or any other event similar to those enumerated above. Such excuse from liability shall be effective only to the extent and duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur and continues to use diligent, good faith efforts to avoid the effects of such event and to perform the obligation. Notice of a Party’s failure or delay in performance due to force majeure must be given to the unaffected Party promptly thereafter but no later than five (5) days after its occurrence which notice shall describe the force majeure event and the actions taken to minimize the impact thereof. All delivery dates under this Agreement that have been affected by force majeure shall be tolled for the duration of such force majeure. In no event shall any Party be required to prevent or settle any labor disturbance or dispute. Notwithstanding the foregoing, should the event(s) of force majeure suffered by a Party extend beyond a four-month period, the other Party may then terminate this Agreement by written notice to the non-performing Party, with the consequences of such termination as if this Agreement had expired (and was not terminated) in accordance with Section xxx.
Force Majeure. Notwithstanding anything to the contrary contained herein, neither party shall be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, acts of war or terrorism, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties or civil unrest. Notwithstanding the foregoing, in the event of such an occurrence, each party agrees to make a good faith effort to perform its obligations hereunder.
Force Majeure. A party shall not be liable for any failure of or delay in the performance of this agreement for the period that such failure or delay is
beyond the reasonable control of a party,
materially affects the performance of any of its obligations under this agreement, and
could not reasonably have been foreseen or provided against, but
will not be excused for failure or delay resulting from only general economic conditions or other general market effects.
Each party would normally be obliged to serve some notice on the other party and inform the other party as soon as possible of the difficulty or impossibility of performing the contract and suspending it for a time.
Are pizza delivery workers employees or self-employed?
This is a question that the Irish High Court has addressed
with a judgment in December 2019 in a case involving Domino’s Pizza delivery
It is an issue that has previously been addressed in the UK
courts in cases involving Uber and Deliveroo delivery drivers. But this High
Court case involving Karshan (Midlands) Limited (t/a Domino’s Pizza) v
Revenue Commissioners  IEHC 894 was the first time an Irish
court had to decide the issue.
The Revenue Commissioners had decided that the delivery
drivers delivering pizza for the company trading as Domino’s Pizza were employees
for tax purposes. The company insisted they were self-employed and therefore
responsible for their own tax affairs and returns. The company trading as Domino’s
Pizza appealed the decision of the Tax Appeal Commissioners to the High Court on
a number of grounds, the most important of which was that the Revenue
Commissioners had erred in law in applying some well-established principles to
These principles are:
Mutuality of obligation-that is, does the
company have to provide work and does the delivery driver have to accept it?
The company argued that the delivery drivers were not obliged to work, they
could pick an choose their jobs, and therefore the necessary mutuality of
obligation between the parties was absent.
Substitution-normally, if you are allowed to substitute
someone else to do your job or carry out duties you are not an employee, you
are self employed
Integration-were the delivery drivers integrated
into the business? If they were then they were likely to be employees but the
company argued that they were an “accessory” to the business, not integral
Contractual terms-the company argued that the Revenue
Commissioners did not place enough weight on the actual terms and conditions
between the parties and placed too much emphasis on how the contract was
The High Court Findings
The High Court found that once the drivers filled out an availability
sheet they then had an obligation to be available. Because of this the High
Court held there was mutuality of obligation.
The High Court also
found that the purported substitution clause only allowed the driver to
nominate a replacement who would then be approved and paid by Dominos. This was
not true substitution.
The Court, in looking at the question of integration into
the business, found that the drivers were integral to and played a vital role
in the business. It also noted the drivers were obliged to wear uniforms and
take orders from Dominos, not the general public or end user.
When it looked at the contractual terms the High Court found
that the Revenue Commissioners not made a mistake in looking at how the
contract was actually performed, as opposed to the terms and conditions set out
in the written contract.
For all of these reasons the High Court held that the delivery
drivers were employees for tax purposes.
Takeaway (no pun intended)
One of the most important points to take from this case is
the High Court’s observation that there is “no comprehensive statutory
or common law definition” of who is self-employed and who is an
employee. For this reason each case will be decided on its particular facts and
It also noted there was no box ticking exercise that you could
complete to answer the question; each case must be looked at and a close scrutiny
of the relationships between the parties must be carried out to be sure of the
This has important implications for employers who need to be
aware of the emphasis that will be placed on the actual relationship between
the parties, and not just on what is contained in the written contract.
The High Court case between Ryanair DAC and
Peter Bellew is an important one because it gives us further guidance in the
area of restrictive covenants in the contract of employment. A restrictive
covenant is basically a covenant in a contract of employment preventing a
departing employee from working for a competitor for a certain period of time
after departing from his employment.
In Ryanair DAC the airline sought to
prevent Mr Bellew from working for a competitor in any capacity for a period of
12 months after leaving Ryanair. This was what Mr Bellew had signed up for when
he signed his contract of employment.
Ryanair sought to prevent him from taking
up employment with Easyjet and sought an injunction in the High Court to
enforce the covenants in his contract of employment with Ryanair. One of those
covenants was as follows:
For a period of 12
months after the termination of your employment you shall not, without the
prior written consent of the Company, directly or indirectly in any capacity
either on your own behalf or in conjunction with or on behalf of any other
a. be employed,
engaged, concerned or interested in any capacity in any business wholly or
partly in competition with the Company for air passenger services in any
b. solicit or
entice or endeavour to solicit or entice away from the Company any person who
was employed within in (sic.) a senior executive, managerial, or technical
capacity by the Company.
1.2 If you receive
an offer of employment or engagement during your employment with the Company,
or before the expiry of the restriction period set out in this clause, you
shall give the person or entity making the offer a copy of this clause.
The defendant in this matter fully admits
that he freely signed the covenant and at the time of signing he fully
understood its meaning and purpose but makes the case that he is not bound by
The case law in this regard provides to be
useful and instructive as to the approach adopted by the Irish Courts in
relation to restrictive covenants.
v. O’Reilly 1979 I.L.R.M 79
“All interference with an individual’s freedom of action in trading is per se contrary to public policy and, therefore, void. The general prohibition is subject to the exception that certain restraints may be justified. Restraints, restrictions or interferences are permitted if they are, in the circumstances obtaining, fair and reasonable. Whether what is complained of can be justified on this basis involves a careful examination of all the circumstances – the need for restraint, the object sought to be attained, the interests sought to be protected and the general interest of the public. What is done or sought to be done must be established as being reasonable and necessary and on balance to serve the public interest”
& Company Ltd v. Purdy 2005 IEHC 159
This a much more recent decision where the
Chief Justice Clarke J. outlined that a restrictive term will not be
implemented unless it satisfies the limbs of the following test
The restriction is reasonable between the
The restriction is consistent with the interests
of public policy
The facts of Murgitroy are as follows. A restrictive covenant in a contract of
employment restricted a Patent Lawyer from working in same sector for a period
of twelve months in the Republic of Ireland. Clarke CJ. Found the restriction in relation to the
geographical nature (not working in Ireland) and the length of the restriction
was reasonable and justified based on the nature of the employers business.
However Clarke J. found that the result of allowing the aforementioned
restrictions would create another, being the restriction to approach clients
who are not pre-existing clients of the employer from being engaged by the
ex-employee was too restrictive. The position of this case was affirmed in the
more recent example of Net Affinity v
Conaghan 2012 3 I.R 67.
ltd v. Philips 1974 A.C 391
The covenant entered into needs to be reasonable between the parties. The holding of this case outlines that the restriction sought must be a reasonable one and cannot restrict an employee from using his skill and knowledge in future endeavors. However, the employer can restrict the employee from using assets or ‘insider knowledge’ that must be regarded as company property.
The accepted proposition that an employer is not entitled to protection from mere competition by a former employee means that the employee is entitled to use to the full any personal skill or experience even if this has been acquired in the service of his employer: it is this freedom to use to the full a man’s improving ability and talents which lies at the root of the policy of the law regarding this type of restraint. Leaving aside the case of misuse of trade secrets or confidential information … the employer’s claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation.’
This becomes especially necessary when
discussing trade secrets/ confidential information or market sensitive
information. Any property or assets of the company that the employee is leaving
must be protected by restrictive covenant because it is essentially, company
property. Even if the employee may have contributed to the ‘company property’
the employer will still be granted protection for what is ultimately their
However, with regard to skill, knowledge
and essentially the employee’s property, no restrictive covenant can restrict
this movement. It must also be noted that if an employer is seeking to enforce
a restrictive covenant simply to protect himself from mere competition, this
will not be allowed.
In the Ryan Air case, Allen J. opined that that covenants are generally never reasonable unless if the competition was allowed it would take advantage of the employers trade position.
The High Court also looked at Hernandez v. Vodafone Ireland LTD 2013 IEHC
v Egon Zehnder Ltd from the United Kingdom Supreme Court.
High Court decision
Court recognized the difficulty in practice of enforcing a confidentiality
clause and referred to Lord Denning in Littlewoods Organisation Limited v
“It is thus established that an employer can stipulate for protection
against having his confidential information passed on to a rival in trade. But
experience has shown that it is not satisfactory to have simply a covenant
against disclosing confidential information. The reason is because it is so
difficult to draw the line between information which is confidential and
information which is not; and it is very difficult to prove a breach when the
information is of such a character that a servant can carry it away in his
head. The difficulties are such that the only practicable solution is to take a
covenant from the servant by which he is not to go to work for a rival in
trade. Such a covenant may well be held to be reasonable if limited to a short
Court had a difficulty with whether the restraint that Ryanair sought went further
than was necessary for the legitimate protection of its interests. It had no difficulty,
interestingly, with the time period of 12 months.
that it could, if the circumstances permitted, use the “blue pencil rule” to
remove an unenforceable provision if the character of the contract was not
changed as a consequence. However, the covenant in this case applies to “any
business wholly or partly in competition with Ryanair for air services”.
With considerable reluctance, but without misgivings as to the applicable law, or my application of the law, I am driven to the conclusion that the clause is void and unenforceable as an unjustified restraint of trade.
195. The other provision of the restraint in this case which troubled me was the prohibition on employment in any business in competition with Ryanair “in any capacity”. It appeared to me that literally construed it would restrain Mr. Bellew from taking up employment with another airline as a pilot or air steward.
208. I find that the plaintiff has discharged the
onus of proving that it had a legitimate interest in exacting a covenant from
the defendant to protect the valuable sensitive and confidential commercial,
operational and financial information that would come to the defendant’s
knowledge in the course of his employment. For the reasons given, I find that
that interest has not been shown to extend beyond those airlines in competition
with the plaintiff in the low cost or low fare sector, to those airlines
operating in the legacy or flag or high cost sector.
209. I find that the covenant in this case,
properly construed, would prevent the defendant from taking up employment with
any European airline, including the legacy carriers, and so goes beyond what
the plaintiff has shown to be justified.
210. The legitimate interest of the plaintiff
in restraining the defendant from taking up alternative employment is limited
to roles which would risk the disclosure or use of its protectable information.
I find that the restraint on employment in any capacity goes beyond that
interest and has not been shown to be justifiable.
211. For the reasons given, I find that the
covenant to which the defendant, for valuable consideration, freely agreed is,
as a matter of law, void and unenforceable as an unjustified restraint of
DAC were refused their injunction because the High Court found
The restraint preventing the
departing employee from working “with any European airline” went beyond what
The restraint preventing Bellew
from taking up employment “in any capacity” goes beyond the legitimate interest
of Ryanair and was not justifiable.
these reasons the High Court decided the covenant was void and unenforceable
and an unjustified restraint of trade.
Takeaway for employers
Employers need to understand that any restrictive covenant is drafted to reflect the specific relationship between employer and employee in any particular circumstance and a “one size fits all approach” runs the risk of being found unenforceable. If it goes too far and is too wide it is unlikely be justified as being necessary to pursue a legitimate interest.
Twelve months, as a temporal restraint, is acceptable and unproblematic.
Confidentiality clauses, whilst necessary and acceptable, are difficult to enforce in practice as confidential information can be used and abused without any evidence of the breach-for example in negotiating terms with competitors.
This was the case of a medical doctor with his own practice
who claimed he was an employee in respect of his work for a training provider.
This is a common issue: whether an individual was an
employee or was self-employed, notwithstanding the statement in a contract that
the individual was not an employee.
All employment claims will depend on the claimant being an
employee. If the claimant falls at this hurdle any other claims-for example
terms of employment or unfair dismissal-will not be heard.
This case involved a medical practitioner who provide
training services for the respondent and brought a claim under the Terms of
Employment (Information) Act, 1994 seeking a written contract of employment. He
had received a contract dated April 1st 2006 which described his position as
being ‘an independent contractor’ and stated that he ‘shall not be an employee’
of the respondent.
The first question that arose, therefore, was whether the
complainant was an employee or an independent contractor.
The WRC Adjudication Officer noted that there is no one test
to determine whether a person is engaged on a contract of employment (contract
of service) or on a contractor contract (contract for services).
The AO referred to a UK case in which a number of tests were
set out as follows:
1) Does the
person performing the services supply his own equipment?
2) Can he hire
his own helpers?
3) Does he
carry any financial risks and to what extent?
opportunity does he have to make a profit?
5) To what
extent does he carry the responsibility for investment/management.
He referred also to the Revenue Commissioners approach and
their tests to determine employment or self-employment as follows:
1) Is under
the control of another person who directs as to how, when and here the work is
to be carried out,
3) Received a
subcontract the work
5) Does not
supply materials for the job
6) Does not
provide equipment other than small tools of the trade
7) Is not
exposed to personal financial risk in carrying out the work
8) Works set
hours or a given number of hours
The AO was satisfied that the complainant in this case, a
medical doctor, satisfied the tests of the Revenue Commissioners. In short it
was recognised that the complainant received a fixed and regular income, was
fully integrated into the respondent’s activity, and satisfied the other tests
of the Revenue Commissioners.
The respondent in this case sought to connect the fact that
the complainant was also involved in other self-employed work-as a GP in his
own general practice-and was paid a locum allowance to undermine the argument
that he was an employee. However, the Adjudication Officer did not accept this
argument and said it had ‘no merit’.
“I do not accept therefore that the payment of a locum
allowance, whatever the recipient chooses to do with it, affects or alters the
substance of the employment relationship between an employee and an employer
which must be considered by reference to the tests set out above.”
He also found
In Hall (Inspector of Taxes v Lorimer  IRLR 171 the
court endorsed an explanation approved by the lower court (whose judgement was
on appeal to it);
‘In order to decide whether a person carries on business
on his own account it is necessary to consider many different aspects of that
person’s work activity. This is not a mechanical exercise of running through
items on a checklist to see whether they are present in, or absent from a given
situation. The object of the exercise is to paint a picture from the
accumulation of detail. The overall effect can only be appreciated by standing
back from the detailed picture which has been painted, by viewing it from a
distance and by making an informed, considered, qualitative appreciation of the
whole. It is a matter of evaluation of the overall effect of the detail, which
is not necessarily the same as the sum total of the individual details.’
The Adjudication Officer had no hesitation in finding that
the complainant was an employee and was entitled to be given a written
statement of his terms of employment, in accordance with the Terms of
Employment (Information) Act 1994.
However, the Adjudication Officer did not consider it ‘just
and reasonable’ to make any order for compensation retrospectively as the ‘current
respondent whose breach of the Act arises for the first time as a consequence
of the finding in this case’. He did order that a statement of terms of
employment be given to the complainant.
This decision was issued on 18th December 2019
and you can read the whole decision here.
It is a useful reminder of the tests which will be applied to determine the
issue of employee versus independent contractor.