Chapter 4 - Settlement Agreements Flashcards
What are the formalities of a settlement agreement?
s203(3) ERA
- be in writing
- relating to a particular proceeding/complaint
- only be made once the employee has received independent legal advice.
- identify the independent advisor
- state that the conditions regulating settlement agreements are satisfied.
What happens if ACAS are involved with reaching settlement?
A settlement achieve this the help of an ACAS conciliator is recorded on a COT3 form.
It is a legally binding alternative to a settlement agreement., and contains much the same information.
When does the “without predjudice rule” apply?
This can be applied to discussions between the employer and employee if it is marked “without prejudice” and is a genuine attempt to settle. It only applies where there is already a dispute.
When can pre-termination discussions be protected by “without prejudice”?
s.111A ERA provides that in cases of ordinary unfair dismissal cases, evidence of pre-termination discussions is inadmissible in any proceedings.
What are the main advantages to using the ACAS COT3 form over a settlement agreement?
- it is free
- it can easily settle all claims between the parties, including ruling out possible future ones.
- benefits from specialist advice from an ACAS officer
- No legal advice is required
What are the main disadvantages to using the ACAS COT3 form over a settlement agreement?
- an ACAS has no legal duty to provide full advice as to the impact of the settlement agreement. There statutory duty is to settle cases.
- The word of COT3 is less detailed and tends to contain more general clauses such as:
” an employee accepts compensation in full and final settlement of these proceedings and of all claims the claimant has or may have against the respondent.”
What must employers be aware of to help protect the without prejudice status of communications?
Without prejudice protection is not absolute. Employers should:
- be aware that there must be a pre-existing dispute and that the further discussions must be a genuine attempt to settle
- any relevant documents should be headed “without prejudice”
- avoid reference to these documents in any documents that might be headed to a tribunal as reference is likely to constitute a waiver of privilege.
- avoid reference to these documents in any internal grievance procedure as reference is likely to constitute a waiver of privilege.
- this rule will not protect evidence of clear impropriety (BNP Paribas v Mezzoterro)
The signing of a settlement agreement brings to an end an employees general right to bring a claim against the employer, either in the courts or an ET.
In what circumstances can an employee still bring a claim?
- if the employer breaches the settlement agreement, the employee can bring a breach of contract claim
- a personal injury claim, unless it is included in the settlement agreement and the employee is aware of the injury when the agreement is signed.
- a claim in respect of accrued pension rights.
- claims for breach of the obligation to inform and consult employee representatives (s.188 TULR(C)A)
- information and consultation claims under TUPE.
What terms are always included in a settlement agreement?
- the names of the parties
- the amount to be paid to the employee and when
- details of claims the employee agrees not to take against the employer
- details of the employee’s legal advisor and their signature
What terms are often included in a settlement agreement?
- a reiteration of any restrictive covenants contained in the employment contract.
- new restrictive covenants
- a confidentiality clause
- provision for an agreed reference.
- a non-derogatory statements clause
Can an “in full and final settlement clause” apply to claims which have not yet arisen (or are unknown to the claimant) at the time of signing the settlement agreement?
COT3 - In theory it is possible to settle future claims using a COT3 form. See Royal Orthopedic Hospital v Howard.
Settlement agreement - A settlement agreement must related to a particular proceeding or complaint and therefore cannot be used to settle claims that have not been previously contemplated. s.203 ERA. See Lunt v Merseyside TEC Ltd
Royal Orthopedic Hospital v Howard
The claimant had settled her previous sex discrimination claim through ACAS. The terms of the COT3 stated that they were “in full and final settlement of these proceedings and of all claims which the applicant has or may have against the respondent.
The respondent argued that this was wide enough to cover future claims that had not arisen at the time when the settlement took place.
The EAT stated that, as a matter of public policy, there was no reason why a party should not contract out of future claims. The question in each case was whether, looking at the settlement agreement objectively, that was the intention of the parties.
The EAT refused to accept that the use of the words “claims which [she] has or may have” was designed to preclude future claims.
Lunt v Merseyside TEC Ltd
The EAT stated that the requirement in the statutory conditions applying to settlement agreements that they must relate to a particular complaint/proceedings meant that Parliament had not intended to permit blanket settlement agreements settling claims which had not been previously contemplated.
Following Lunt, the position is that a settlement agreement can settle a claim only if that claim or complaint has been raised by the claimant prior to the settlement.
How should the provision of a reference be dealt with in the terms of the settlement agreement?
A detailed reference should be explicitly agreed and either included within or attached to the settlement agreement.
It should be accurate and fair (Cox v Sun Alliance) and should not mislead or be composed negligently.
How should the matter of pension benefits be dealt with in the terms of the settlement agreement?
It is important to spell out in the settlement agreement that acceptance of the settlement sum is not in full and final settlement of future entitlements to pension.
