Sometimes employers and employees get together to negotiate an exit package. This may be in a redundancy situation, a retirement situation or any other situation where the continuance of the employment relationship does not suit one or both parties. It is vitally important that the package agreed should be understood by both parties and that agreement is reached on the basis of informed consent.
It is well established that a well drafted and properly executed compromise agreement can prevent or limit the possibility of proceedings against an employer. Two seminal cases in this jurisdiction demonstrate the importance of informed consent and independent legal advice in ensuring that the agreements reached can stand up.
In Kerrigan v Smurfit Kappa Limited c/o Smurfit Kappa UD1921/2011, the EAT found that the former employee had not been advised to seek legal advice before signing his waiver and discharge form. The employee succeeded in a case for Unfair Dismissal even after taking his “package” in full and final settlemet of all claims. The EAT endorsed the test in the Hurley v Royal Yacht Club  ELR 225 case. In that case the court held that there must be informed consent to a waiver of Unfair Dismissal rights. They found that BOTH of the following conditions must exist:
- the employee should be advised of his entitlements under employment legislation and that any agreement or compromise should have listed the various Acts which were applicable or at least made it clear that the employee should take them into account, and
- that the employee should be advised in writing that she should take appropriate advice, which presumably in this case would be legal advice.
The case of Healy v Irish Life Assurance (DEC-E2015-002) showed that a validly executed compromise agreement will be upheld where proper procedures are followed.
In that case “there was
- meaningful negotiation and discussion..
- professional advice of an appropriate character before the agreement was signed.”
The Equality Officer who dealt with the case found that the procedural fairness in the dismissal meant that the employee could not claim that he did not understand what he had done by signing the compromise agreement.
- It is vital to have informed consent when employees are signing a settlement/compromise agreement terminating their employment relationship.
- Employers should advise employees to seek independent legal advice.
- Employees or employee groups should be free to appoint their own advisors
- That an employee has taken independent legal advice should be clearly stated in the agreement.
- Most employers will pay the employee’s costs of taking independent legal advice.
At O’Donnell McKenna we act for both employees and employers. We advise individual employees and individuals forming large groups of employees. We ensure that our clients are fully informed and that they understand what they are being asked to sign.
For employers we advise on termination options and procedures. We can negotiate and liaise with employee groups. With proper planning and we can help minimize the unpleasantness of a termination situation for all parties.
If this is something you would like us to help us with, please get in touch with Ian McKenna at firstname.lastname@example.org