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Employment Claims The Employment Contract

Employment Termination Agreements-the 1 Big Decision for the Employee

employment termination agreement

Employment termination agreement, severance agreement, compromise agreement, waiver agreement, settlement agreement.

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:

  • The parties
  • 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
  • Confidentiality
  • Secrecy
  • Non disparagement by the parties
  • Reference or statement of employment
  • Binding agreement
  • 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.

Conclusion

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.

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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.

Categories
Employment Claims

Avoid This Costly Mistake in Your Employment Settlement Agreement

settlement-agreement

I nearly threw up my porridge when I read of this case.

Joan Healy and Michael Healy against Bia Ganbreise Teoranta (full decision here).

This case involved the effectiveness of a settlement agreement to prevent future claims arising from the employment.

This is a common type of agreement used to settle many employment related disputes.

It is also used when making an employee redundant and intends to provide protection for the employer.from future claims by that employee.

In this case the appellants, Joan and Michael Healy, sold their business to company F in 2008 and commenced working with F.

In September 2010 the Healys issued Circuit Court proceedings against Co. F claiming damages for breach of contract for failure to pay each of the appellants certain wages.

In 2011 the Healys compromised their Circuit Court claim after their employment had ceased with F and they were offered new employment with X, which with F had bought the entire share capital of A, a subsidiary of F.

When they compromised their claim the settlement agreement contained a “full and final settlement” clause which is common in these types of agreement. The settlement sum was €31,750 in respect of unpaid wages for a 2 year period.

In 2012 X placed the Healys on a temporary lay off. They in turn served a RP9 form claiming  redundancy payments from X.

X  informed the Healys that their positions in X were redundant and no suitable alternative positions were available.

In July 2012 the Healys initiated appeals under the Redundancy Payments Acts with the Tribunal, each appellant seeking a redundancy lump sum payment from the respondent.

The respondent contended that the Employment Appeals Tribunal had no jurisdiction to hear the appeals under the Redundancy Payments Acts 1967 to 2007 by virtue of the settlement agreements, in particular by virtue of clauses 7 &13 thereof.

X also contended that, in any event, the appellants did not have the requisite two years’ service to entitle them to a redundancy lump sum payment.

Section 51 of Redundancy Payments Act 1967

51.—Any provision in an agreement (whether a contract of employment or not) shall be void in so far as it purports to exclude or limit the operation of any provision of this Act.

However, the Tribunal accepted that it was well accepted that this does not preclude severance agreements or agreements compromising claims containing such exclusions.

The settlement agreements in this case contained these 2 clauses:

  1. Clause 7 The Employee agrees that the terms of the Agreement provide a full and final settlement of the proceedings and all or any claims that he/she has or may have against the company and /or the employer and/or any of their respective group of companies, officers and/or employees agents and shareholders, howsoever arising, including, without limitation, arising out of or in connection with the employment of the Employee of the company and /or the employer and /or any of their respective Group companies, and the employee hereby fully and finally releases all such entities from all or and any such claims, whether in statute or common law in tort, in equity or otherwise howsoever arising
  2. Clause 13 This Agreement shall enure to the benefit of and be binding upon the respective parties hereto and their respective personal representatives and successors.

In Hurley v the Royal Yacht Club [1997] ELR 225 Buckley J.in the Circuit Court considered a waiver clause in an agreement in the context of the Unfair Dismissals Acts and having concluded that there must be informed consent to such a waiver later in his judgement set out what this requires:

         “I am satisfied that the applicant was entitled to be advised of his entitlements under the employment protection legislation and that any agreement or compromise should have listed the various Acts which were applicable, or at least made it clear that they had been taken into account by the employee. I am also satisfied that the applicant should have been advised in writing that he should take appropriate advice as to his rights, which presumably in this case, would have been legal advice. In the absence of such advice I find the agreement to be void”

This statement of the law was applied by Smyth J. the High Court in Sunday Newspapers Ltd v Kinsella and Brady [2008] ELR 53.

In this case the Tribunal accepted that the Healys were legally advised and gave their informed consent to the waiver.

However, Clause 7 of the settlement agreements neither lists the various Acts under which the appellants might have waived their entitlements nor does it make clear that they had been taken into account by the appellants.

The unsworn and uncontested evidence on behalf of the appellants was that the unpaid wages of the appellants was the only issue discussed in the negotiations leading to the settlement agreement. This fact is corroborated by a number of other uncontested facts: the settlement figure of   €31, 750.00 was the precise amount of the unpaid wages owing to the appellants; payslips dated 30 July 2011 in this amount with the usual deduction made therefrom were issued to each of the appellants and the respondent’s letter of 23 September 2011 to the Office of the Revenue Commissioners confirming that that the payment was in respect of a number of weeks worked in 2009-2011

The Tribunal found  that there was no break in the appellants’ employment between 7 July 2011 and 16 July 2011 and that on the purchase of the entire share capital of Co A by Co X in May 2011 the rights of the employees remained unaffected.

Similarly, a change of company name does not affect those rights.

Accordingly, for the above reasons the Tribunal finds that the appellants did not waive their statutory entitlement to a redundancy lump sum payment, their employment had been continuous from the time they became employees on 8 July 2008 until it was terminated by reason of redundancy on or around 22 March 2012.

Conclusion

I have come across standard “template” type forms which employers are using when they are paying redundancy to an employee.

This case shows the importance of having a properly drafted settlement agreement in settling any claim or paying off an employee by way of redundancy.

Categories
Unfair Dismissal

Why You Should (Almost) Never Resign-Make Them Fire You

fair dismissal

Make them fire you.

Don’t make it easy for them.

Let me explain.

If an employer dismisses you it must be a fair dismissal.

And if you bring a case for unfair dismissal the employer will have to prove the dismissal was fair and justified.

The burden of proof is on the employer.

And it can be difficult to justify a dismissal because many employers get the procedure wrong.

In fact, 80% of unfair dismissal cases are lost because of the absence of fair procedures in carrying out the dismissal.

On the other hand, if you quit because of what you claim is the intolerable conduct of the employer you must prove you had no option but to resign.

In other words, the burden of proof shifts from the employer to the employee.

And the standard of proof is pretty high too.

It is not enough to show that (s)he was unpleasant, or rude, or had rough and ready management skills.

No, you must prove you had no option but to quit.

However there are exceptions to every rule and there are two circumstances where you may well be justified in quitting:

  1. Where to continue on in the employment may be injurious to your health and well being or
  2. Where you can negotiate an exit settlement which is satisfactory to you and avoids the inevitable dismissal/termination.

Many employees come to me with serious problems that they are suffering at work.

And many of them are worn out with the anxiety and the hassle that they face on a daily basis at work.

So many of them quit and just move on. Regrettably they have just made things a lot easier for the employer.

It’s not impossible to win a constructive dismissal case. But it’s much harder than to win an unfair dismissal.

So if you are an employee and you are in a difficult situation in work, think long and hard before quitting.

In the short run it can be tough to hang in there.

But in the long run it may be your best option because it allows you to negotiate an exit or bring a successful case for unfair dismissal.

You can learn more about unfair dismissal and constructive dismissal here.

When You Should Resign

You should resign if you are happy to do so, and if you are resigning on terms which are satisfactory to you. This would be when there is a negotiated settlement agreement.

Learn more about negotiated settlements here.

What do you think? Are the issues above familiar to you? Let me hear your comments below.