It is commonplace to negotiate severance terms before an employee leaves employment due to redundancy. Discussions usually agree the sums to be paid and formal settlement agreements are signed to create a clean break between the parties.
Chris Dobbs, Solicitor in our Employment Team, discusses a recent case where two parties had different ideas about what had been agreed, as well as what could be enforced in a settlement agreement.
What is a settlement agreement?
Settlement Agreements are legally binding contracts which are signed between an employee and employer. They settle claims which an employee may have arising from their employment such as pay claims or discrimination, or claims following termination of employment such as unfair dismissal.
I have previously written about employment settlement agreements, where I provided a more in-depth guide of what they are and when they can be used. You can read that article here.
Evergreen Timber Frames v Harrington
In Evergreen Timber Frames v Harrington, the employee worked for the employer as a manager. He was told he was at risk of redundancy and his severance terms were discussed over several months.
Before his dismissal, the employer wrote setting out the amounts that the employee would be paid on termination if he worked his notice and said they would like to ‘gift’ him a car.
The employee wrote back (via an appeal letter) accepting the gift of the car but querying the redundancy calculation and complaining that they had agreed in verbal discussions that the company would also give him a computer and a month’s pay as a bonus.
Alleged breach of severance contract
When the car was not transferred on termination, the employee then brought claims for breach of contract. The employment tribunal upheld part of his claim relating to the car, saying an agreement had been reached for its transfer as part of the severance package.
It had been offered in the employer’s letter and accepted in the employee’s appeal letter. They awarded him £8400, representing its value. The employer appealed.
To read the whole article and to find out the outcome of the case, click here.