Settlement agreements - HR and employment law in education conference 2015, Heather Mitchell

Settlement Agreements in academies

How, when and things to think about

Heather Mitchell - Associate

HR and employment conference for

school leaders 2015

#BJHR15

Settlement agreements

Managing the end of the employment relationship

When might you want to use a settlement agreement?

Having ‘the conversation’

‘Protected conversation’

vs

‘Without prejudice’

What is a settlement agreement?

• binding contract

• sign away the right to bring a claim

• payment to be made

• legal advice required to be binding.

What can be settled?

What can’t be settled?

Personal injury

• claim already issued in the courts

• can settle, annex a consent order

• injury employer knows about but not claim brought

• can settle, name specifically

• potential existing claims employee is not aware of

• can settle, specific wording required, usually

negotiated out

• claims not yet arisen

• can not settle (breach of Unfair Contract Terms Act).

‘any future claims’

Hilton UK Hotels Ltd v McNaughton EATS/0059/04

No example of wording that passes that test

“whilst parties may agree that a compromise agreement is to

cover future claims of which an employee does not and could

not have had knowledge, to do so effectively, the terms of

their agreement must be absolutely plain and unequivocal”

Managing long notice periods

Practical solution is to make payment conditional

on signing a ‘reaffirmation letter’

Tax

The first £30,000 of any non contractual payment

is tax free.

Does this include notice?

• PILON clause

• no PILON clause.

Common clauses

Confidentiality

Mutual?

Relationship with HMRC, DfE?

Apology

“we are sorry if you feel…”

References

Factual?

Answering questions outside the reference.

Announcements – managing the PR impact

“Mr Smith is leaving to

pursue other interests”

“It is with regret that the governors announce

that today is Mrs York’s last day at the school.

We thank her for her contribution”

Include restrictive covenants?

Usually appropriate for senior staff only

Examples include:

• non poaching

• non solicitation

• non competition.

Additional payment required.

Other clauses

Return of property

Warranties?

Legal fees

Special staff severance payments

Approval is required for payments over £50,000

above contractual pay.

Handbook requirements

“If an academy trust is considering making a staff severance

payment above the statutory or contractual entitlements, it

must consider the following issues:

• whether such a payment is justified, based on a legal

assessment of the chances of the trust successfully

defending the case at employment tribunal. If there is a

significant prospect of losing the case then a settlement may

be justified, especially if the costs incurred in maintaining a

defence are likely to be high. Where a legal assessment

suggests that the trust is likely to be successful, then a

settlement should not be offered;”

Handbook requirements

“Staff severance payments should not be made where they

could be seen as a reward for failure, such as gross misconduct

or poor performance. The only acceptable rationale in the case

of gross misconduct would be where legal advice is that the

claimant is likely to be successful in an employment tribunal

claim. In the case of poor performance, an acceptable

comparison would be the time and cost of taking someone

through performance management and capability procedures.”

www.education-advisors.com

Talk to us…

Heather Mitchell | 0207 871 8511

heather.mitchell@brownejacobson.com

Please note

The information contained in these notes is based on the position at

October 2015. It does, of course, only represent a summary of the

subject matter covered and is not intended to be a substitute for

detailed advice. If you would like to discuss any of the matters

covered in further detail, our team would be happy to do so.

© Browne Jacobson LLP 2015. Browne Jacobson LLP is a limited

liability partnership.