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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
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.
