Employee claims compromise agreement not binding on her because no independent legal advice

employment termination agreement

The ending of an employee’s employment will often be accompanied by some type of agreement between the parties. Agreements of this type are referred to as exit agreements/settlement agreements/compromise agreements/termination agreements.

Regardless of how they are described they will nearly always involve a payment by the employer to the employee in return for which the employee waives his/her right to bring any employment claims against the employer in the future. This is known as an “ex gratia payment”.

The agreement will include other standard terms, too, but the fundamental quid pro quo will be a waiver by the employee of his/her right to bring any claims against the employer arising from the employment in return for the payment of a sum of money.

The employer gets the peace of mind that no claims can arise in the future from the employee. The employee gets the money and perhaps a reference that she can influence.

Independent legal advice

It is strongly advisable that an employer would ensure the employee obtains legal advice about the significance and meaning of the agreement. At the very least the employee should be encouraged to obtain legal advice but most agreements will make provision for the discharge of a fee for legal advice by the employer.

This is not just an act of generosity by the employer.

It also provides him with protection against the argument in the future that the employee did not know what he was doing by signing the agreement.

Nevertheless, it happens quite frequently that an employee will bring a claim to the Workplace Relations Commission anyway, perhaps arguing that he/she did not understand what he was signing or on some other ground.

The employer will undoubtedly argue that the compromise agreement is binding on the parties and the WRC does not have jurisdiction to hear the case.

Such was the case in a recent WRC decision where an administrative assistant lost her job which was purportedly a redundancy.

The employee signed an agreement waiving her right to bring a claim against the employer but then brought a claim for unfair dismissal to the WRC.

She claimed she signed the agreement under duress without legal advice or advice from her trade union and was threatened with the loss of her ex-gratia payment.

She also claimed she did not understand the agreement and was under psychological distress and could not afford to lose the ex-gratia payment.

The employee relied on  Cullinan v Reagecon Diagnostics Ltd (UD458/2105), and Rynn v Reagecon Diagnostics Ltd (459/2015) and Hurley v Royal Yacht Club and contended that she had not given informed consent and the agreement was not strong enough in stating that she was given the opportunity to take independent legal advice.

Previous decisions of the Employment Appeals Tribunal had held that the requirement for informed consent would not be met merely by the statement in an agreement that she “was given the opportunity to take independent legal advice”.

The respondent argued that this was a genuine redundancy and the procedure was correct. They also contended that the compromise agreement signed by the employee waived her right to bring claims in the future and the WRC did not have jurisdiction to hear the case as a consequence of the signed agreement between the parties.

The respondent argued that the appropriate legislation(Unfair Dismissals act 1977) was listed in the compromise agreement and relied on Sunday Newspapers v Kinsella & anor and that it was not necessary to obtain professional legal advice in writing.


The adjudicator referred to Hurley v Royal Yacht Club [1997] 8 ELR 225 and held that the employee must have informed consent and the waiver of legal rights must specifically refer to the various acts applicable and which were being waived. Moreover, the employee should be advised in writing that he should take appropriate legal advice as to his rights.

The adjudicator held that he was satisfied he had jurisdiction to hear the case because the employee had not received legal advice nor advice from her union and was impacted by a medical condition when she signed the agreement.

The preliminary objection by the respondent to the hearing of the case was rejected.

However, the adjudicator did accept, when he heard all the facts of the case, that it was a genuine redundancy and the claim for unfair dismissal failed.

Read the full decision here.