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Employment Claims

Employment termination agreements-how effective are they?

Employment termination agreement

The use of a settlement or compromise agreement in the termination of an employee’s employment is something I deal with frequently.

There is a wide range of reasons why the employment is being ceased, ranging from redundancy to difficulties in the employment relationship to allegations of misconduct to allegations of bullying, discrimination, harassment, and so on.

Often the parties will look at the advantages and disadvantages of getting into a full blown dispute, either in Court or at the WRC or Labour Court, and decide that a “negotiated exit” from the employment might be the best option for both employer and employee. This way means that matters are settled confidentially and both parties avoid the prospect of a costly legal battle that could go either way. The employer may also avoid the cost of an investigation and disciplinary hearing in the workplace, something that can be disruptive, divisive, and expensive.

The employee might also, as part of the settlement deal, negotiate a satisfactory reference or, at a minimum, a neutral “statement of employment” which will not adversely affect their future career prospects.

All correspondence up to the signing of such agreements will be on a “without prejudice” basis, just in case the negotiations break down. If the talks do fail then none of the preceding correspondence can be used in evidence later at a hearing between the parties.

The central purpose of such agreements can be boiled down to an essence whereby the employer pays a termination payment to the employee in return for the employee signing an agreement in which she will waive all her rights to bring any further claims against the employer arising from the employment. Both sides avoid a messy conflict with an uncertain outcome and move on with their lives.

Both sides have certainty and in business or life or in one’s career there is a lot to be said for this.

How effective are settlement agreements?

How effective are these agreements? Can the employee come back for another bite of the cherry?

All these agreements will contain a clause confirming the employee has obtained independent legal advice about the agreement or will sign the agreement waiving their right to obtain such advice.

That does not mean that an employee will not later attempt to bring a claim against the employer, notwithstanding the signed agreement. Generally, but not always, such agreements are effective and do what the employer wants them to do: prevent any future claims.

In a WRC case (ADJ-00020068) from January 2020 an employee attempted to have another nibble in circumstances where he had signed a settlement agreement. The employee argued that he did not have knowledge of the Irish legal system and attempted to have the agreement set aside.

The agreement contained the usual clause to the effect that it was an agreement “in full and final settlement, satisfaction, release and discharge of any and all claims … arising out of the employee’s employment or termination of his employment”

The adjudicator declined to hear the case as a consequence.

In like fashion the Labour Court had a similar case in Higgins v Dept. of Foreign Affairs, UDD 1969. The employee had signed a settlement agreement releasing the employer from all liability, damages or causes of action, whether known or unknown, relating to [her] employment … or the termination of that employment, or any other acts or events.

The employee had obtained professional legal advice and the Labour Court held the agreement was effective and dismissed the case.

Effective settlement agreements

An effective settlement agreement will almost certainly be one in which the employee confirms she has had legal advice and there will be confirmation from a solicitor that he has advised the employee regarding the agreement.

It may be sufficient that the employee waives his right to get independent legal advice but I, if I was advising the employer, would warn the employer about the dangers of accepting this and would advise against it.

Moreover, I have seen cases where the advice of an experienced trade union advisor has been held to be effective and binding, notwithstanding the absence of legal training or qualification.

You need to be careful, too, that all of the acts and potential claims that are being waived should be listed in the agreement, with no omissions. For example, if the agreement only refers to claims arising from statute but does not make reference to common law or tort or contract may leave the employer  susceptible to attack on an unanticipated front.