Compromise agreements

Legally binding settlements, in which the parties refrain from issuing or continuing proceedings, can be agreed before a case reaches a tribunal. This can happen through the services of an Acas conciliation officer (see page 25), in which case the agreement will usually be put in writing on a form COT3, or through a compromise agreement reached following advice from a relevant independent advisor, such as a solicitor with a practising certificate, a certified union official or advice worker. If an advice centre worker is providing the advice, there must have been no payment for it.

By signing a compromise agreement, the employee is barred from bringing or continuing with a claim in relation to the issues specified. Compromised claims can include present and future claims if these are, or could have been, contemplated at the time of the agreement (Byrnell v BT EAT/0383/04).

However, in Hinton v University of East London ([2005] IRLR 552), the Court of Appeal said it was not enough for an agreement to refer to “all claims” in order to compromise any claim the employee might have. The agreement must clearly indicate the particular proceedings it is compromising. Dr Hinton’s claim for whistleblowing was not compromised because there was no mention of public interest disclosure or description of those facts. He could therefore pursue his claim.

If a representative enters into an agreement on an individual’s behalf, that individual must have given them authority to do so. In Gloystarne & Co Ltd v Martin ([2001] IRLR 15), Mr Martin was not bound by a settlement agreement made by a union official through Acas because he had not given his consent. However, if the appropriate authority has been given, it is virtually impossible to unravel a compromise agreement (Gibb v Maidstone & Tunbridge Wells NHS Trust [2010] EWCA Civ.678).

Individuals who secure compensation under the terms of a compromise agreement would be well advised to observe any confidentiality clause, to avoid the risk of employers relying on the breach of confidentiality to refuse to make payments due under the agreement (Fahim Imam-Sadeque v Bluebay Asset Management (Services) Limited [2012] EWHC 3511 QB).

Also, watch out for clauses within a compromise agreement that involve an employee warranting that s/he has not breached any term of his or her employment contract. (See for example Collidge v Freeport (2008 IRLR 697). The government wants to encourage the use of compromise agreements and proposes to simplify them, re-naming them “settlement agreements”. The new proposals are expected to be in place during 2013.