Employment Update April 2009: Compromise agreements

29 April 2009

Employment Group

Able to cover future claims?

In McLean v TLC Marketing the EAT considered the case of a claimant who had settled sex discrimination claims against her employer by entering into a compromise agreement, under the terms of which she accepted £28,000 and the promise of an open reference in agreed terms in full and final settlement of her current claims and ‘any other claim arising out of or connected with her employment with [the respondent] and its termination’.

The employer failed to pay the money or provide the reference and the claimant was compelled to take action in the County Court to enforce the contract terms. She then brought a further tribunal claim of victimisation, alleging that the employer had failed to comply with the agreement because it related to her original claim.

The employment tribunal thought that, because of the wording of the compromise agreement, she could not bring such a claim. The EAT disagreed. The wording of the compromise agreement did not prevent a claim that was not known about at the time of the agreement.

Points to note –

  • Provision is made in the Employment Rights Act for employees to be able to give up their statutory employment protection rights but only if they enter into an agreement which fulfils the requirements of Section 203 of that Act. One of the requirements is that the employee should be given independent legal advice. We shall be happy to advise further on all the procedural requirements necessary for a binding compromise agreement.

  • The EAT in McLean confirmed that it is possible (although it was not done in this case) for the employee to give up all claims, whether known of at the time of the agreement or not. If that is what the parties intend and the wording of the compromise agreement is clear, then a court or tribunal will enforce the contract terms. However, ‘it would require extremely clear words for such an intention to be found’.