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How can I dismiss an employee so they will not sue me?

Barristers Michael Salter and Chris Bryden advise on whether you can enter into an agreement with an employee to avoide them suing in the event of dismissal.

Barristers Michael Salter and Chris Bryden advise on whether you can enter into an agreement with an employee to avoide them suing in the event of dismissal.

THE SITUATION

I am currently going through a performance review procedure with a member of my staff who is under-performing in their job. I have seen no improvement in their performance and wish to dismiss them. Is there any way I can enter into an agreement with the employee so they will not sue me?

THE ADVICE

Salter's law of Employment Tribunal litigation is: "the employer always loses out". This may be because the employer is found liable and is ordered to pay compensation. Or it may be that the employer wins in the Employment Tribunal but only after investing a large amount of time, effort and money in defending the claim.

This will involve speaking with lawyers, compiling witness statements, considering the other side's statements, attending and sitting in the Tribunal, often for a number of days, merely to obtain a ruling that states they did not unfairly dismiss their employee. As costs are rarely awarded in the Tribunal, the successful employer may never get this money back.

Even if the employer has the benefit of legal expenses insurance, the costs and any award are likely to be reflected in a higher premium; and insurance does not cover the time and effort consumed by the legal process.

The law allows parties to settle their disputes by entering into so-called "Compromise Agreements". These agreements save the time, effort and expense an employer invests in Tribunal proceedings, if proposals which are acceptable to both sides can be agreed. In return for signing such an agreement the employee may receive a sum of money, or some other benefit that the employer is willing to provide (a very common example is a reference, the terms of which are agreed between the employer and employee).

It is worth bearing in mind that an Employment Tribunal does not have the power to order an employer to provide a reference. Therefore references can be very powerful bargaining chips.

Compromise Agreements may also be attractive to an aggrieved employee inasmuch as entering into a defined agreement will remove the uncertainty of waiting months for a Tribunal claim, only to lose having incurred the expense of solicitors' fees.

As a method of settling disputes they should always be considered, although many insurance policies will not cover sums paid over following such negotiations and the Practice will therefore have to bear the costs. It is therefore important to ascertain the terms of any insurance policy that is in place.

Compromise agreements are only available in respect of certain types of claim (e.g. some unfair dismissals). Where they are available, there are certain formal requirements which are necessary for an agreement to be deemed a Compromise Agreement.

These include that the Agreement must be in writing, and that the employee must receive independent legal advice as to the terms and effect of the Agreement. It is usual for there to be a term that the employer pays a sum towards the employee obtaining such legal advice.

Compromise Agreements are legally binding and amount to a contract. Therefore if the employee commences litigation despite signing a valid Compromise Agreement which contains a clause stating that they will not do so, the employee faces being sued for breach of contract. Such a claim may (if brought in the civil courts) result in the employee being ordered to pay the employer's costs if successful.

It is vital that employers, when considering entering into a Compromise Agreement, obtain specific legal advice, due to the formality requirements and the limits on the range of claims that Compromise Agreements can cover.

Further, the offering of a Compromise Agreement by an employer to an employee, where the terms are wholly unreasonable, may constitute a breach of the contract of employment, which then entitles the employee to sue the employer for constructive dismissal As with all employment related disputes, if in doubt, seek advice – Bryden's law of Employment Litigation!

Michael Salter and Chris Bryden are barristers at 2 Gray's Inn Square Chambers: www.2gis.co.uk Legal points are provided for information and discussion only and are given without obligation. For specific legal advice consult your solicitor

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