tribunal could decide compromise agreement unenforceable due to
misrepresentation
A recent case has arguably made it easier for employees to claim
that a compromise agreement signed by them is unenforceable because
of a misrepresentation by the employer. Normally such claims have
to be brought in the County Court or High Court with the applicable
costs regimes, but in this case the Employment Appeal Tribunal
(EAT) decided that the Employment Tribunal (ET) itself could
determine that a compromise agreement was unenforceable. Mrs
Vincent reached a compromise agreement with her employer and on
that basis she unconditionally withdrew an ET claim she had made. A
month later her employer entered creditor's voluntary liquidation
and the payments under her compromise agreement were not made. Mrs
Vincent applied to the ET to set aside the compromise agreement on
the basis that the employer must have known they were not going to
be able to comply with the payment.
When the employer appealed, the EAT decided that the Employment
Tribunal – rather then the County Court – could consider her claim
on the basis that the ET has to ensure that a valid compromise
agreement has been reached. "Valid" means not only in the sense
that it complies with the strict requirements in the Employment
Rights Act 1996 relating to compromise agreements, but also in the
sense that it has not been reached on the basis of a
misrepresentation. The result is significant given the fact that
the employee is not exposed to the same costs or delay as they
might be in the County Court or High Court. Employers need to
ensure they are not making any misrepresentations when negotiating
and concluding compromise agreements (which is conceivable with,
for example, redundancy dismissals). The case also highlights the
need for compromise agreements to be properly drafted each time on
the basis of the individual case, even when they might seem
straightforward.
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