Issue 92 - July 2007

More on Compromise Agreements…

There has been a recent flurry of case law on Compromise Agreements and June was no exception. This time, the issue concerned the breach by an employee of certain warranties in the Compromise Agreement and the resulting non-payment by the employer of his termination monies.

In Collidge v Freeport plc, Mr Collidge (CEO of Freeport plc) entered into a Compromise Agreement under which the Company agreed to pay him £445,680 “subject to and conditional upon the [remaining] terms.” As part of the Compromise Agreement, Mr Collidge provided a warranty that, as at the date of the Agreement, there were no circumstances of which he was aware, or ought to have been aware, which would constitute a repudiatory breach of his employment contract entitling the Company to summarily dismiss him. Before payment under the Compromise Agreement became due, the Company discovered a number of matters that suggested a breach of this warranty, including misuse of the company credit card and fraudulent expense claims and as a result refused to pay Mr Collidge the termination monies under the Compromise Agreement.

The Company argued, and the High Court agreed, that as payment was conditional upon the terms of the Compromise Agreement, including the above warranty, the Company was not obliged to pay Mr Collidge the agreed sums yet the Compromise Agreement remained valid and binding to settle claims against the Company.

The EAT found in Harris v Towergate London Market Limited that a letter challenging an employee’s dismissal for redundancy, expressly stated to be a “grievance”, actually amounted to an appeal.

The Statutory Grievance Procedures do not apply where the grievance is that the employee has been dismissed. Where an employee wishes to challenge their dismissal, the proper route for doing so is to appeal against the dismissal under the Statutory Disciplinary and Dismissal Procedure. The time limit for bringing a Tribunal claim will be extended by 3 months where an employee has reasonable grounds to believe that a dismissal procedure is ongoing.

In this case, on the incorrect advice of her Trade Union, rather than lodging an appeal, Mrs Harris lodged a formal grievance challenging her dismissal for redundancy by Towergate London Market Limited. She then sought to bring a claim for unfair dismissal outside of the ordinary time limit. The EAT held that Mrs Harris had reasonable grounds to believe that a dismissal procedure was being followed and her claim was therefore in time by virtue of the 3 month extension. The EAT added that it was incorrect to ask whether a formal appeal had been lodged and on the facts, it was clear that the purpose of her letter was to challenge her dismissal.

This further demonstrates the low threshold that employees are required to meet to comply with the statutory dispute resolution procedures. It is a warning to all employers to treat any form of written challenge against a dismissal as an appeal to avoid the dismissal being automatically unfair.

In Beattie v Age Concern, Age Concern’s sick pay policy provided for the payment of “six months’ full pay and then six months’ half pay” for employees with over five years’ service. Mrs Beattie’s contract of employment stated that she would work a guaranteed minimum of 15 hours per week but in reality she worked over thirty hours per week. Mrs Beattie commenced a period of sick leave and Age Concern sought to argue that her sick pay should be calculated on the basis of her minimum hours of work set out in the contract rather than her average hours of work.

The EAT rejected this argument and held that on the proper construction of the contract, the parties would have expected “pay” to mean pay for hours actually worked and that as the purpose of the scheme was to provide employees with a continued income “pay” should be construed as continuation of the pay received by Mrs Beattie to date. It is therefore advisable that employers expressly define how “pay” should be calculated in any sick pay policy applicable to employees with variable hours of work.

Quickfire! The Information Commissioner has recently found Orange in breach of the Data Protection Act. Orange had failed to keep personal information secure by allowing new employees in their customer service centre to share user names and passwords when accessing the company IT system. This serves as a useful reminder to employers on the importance of keeping personal data secure.

Staying with the Data Protection Act (DPA), recruitment agencies beware! The Information Commissioner has announced a crackdown on recruitment agencies as research suggests that 50% of recruitment agencies have not notified the Information Commissioners office that they process personal data under the DPA. Unfortunately for one recruitment agency this has recently resulted in them being fined £2000.

The Government has published its response to the recent consultation exercise on increasing statutory holiday entitlement. Statutory annual leave will be increased from 4 weeks to 4.8 weeks (i.e. 20 days to 24 days for full-time workers) on 1 October 2007 however plans to increase it further to 5.6 days (28 days for fulltime workers) have been delayed, coming into effect on 1 April 2009.

If you have any questions about this, or any other employment law related matter, please get in touch with any member of the team using the details below.

JOLYON BERRY t: 01473 406356
JEANETTE WHEELER t: 01603 756427
LOTTIE HAMMOND t: 01603 756419
LISA HAYWARD t: 01473 406316
MATTHEW NEWNHAM t: 01603 756412
SONYA O’REILLY t: 01603 756413

If you have any questions about this, or any other employment law related matter, please be in touch with any member of the team. Also, if you think that you should have received an invitation to our Early Bird seminar recently, but did not, please let us know.

The content of this document is for general information only. As always, specific professional advice should be taken on each individual matter © Birketts Solicitors 2007. Birketts LLP is constituted as a limited liability partnership in accordance with the Limited Liability Partnerships Act 2000. Where we refer to a 'partner' of Birketts LLP, whether in this brochure or in any other correspondence or communication with you, the term 'partner' means a member of Birketts LLP, and shall not be construed as indicating that the members of Birketts LLP are carrying on business in partnership within the meaning of the Partnership Act 1890.

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