Should we use a compromise or settlement agreement in redundancy?Posted in : Seamus Says - Employment Law Discussion on 2 March 2018
Q: Should we use a compromise or settlement agreement in redundancy?
Scott: It’s probably advisable to do some kind of compromise agreement or a settlement agreement through the LRA.
Seamus: Yeah. I think the main thing about redundancy that strikes me is that it’s very emotive. You hear lots of talking around it’s not you personally. It’s the post that we’re dealing with when it comes to redundancy. But for anyone that’s made redundant, that’s not how it feels. People can take these things incredibly thick and really, it does become a peripheral issue. They’re losing their employment.
Certainly, I would advise clients in the past that want to bring claims for fair dismissal via redundancy and even when you look at the procedure and you say the procedure is pretty sound here, there’s all the tools that you can pick. So, there is the assistant that you can have in terms of looking to compromise the claim, obviously with a compromise, you’re maybe paying above and beyond what the statutory redundancy calculation would be or alternatively, you can look at the compromise by assistance with the Labour Relations Agency, which is sometimes the better way to go down.
Scott: That takes away their right to continue any claim. It keeps the employer safe and it maintains the security of the payment, if you like, for the employee as well.
Scott: And you can do things like agree any references and all that kind of stuff.
Seamus: Yes. There’s lots that you can do in the compromise agreement or a settlement agreement if you’re in England, but a compromise agreement here that a tribunal can provide for an employee. So, there’s certainly a benefit to the employee in terms of what the employee can achieve and get out of the process. Essentially, what you’re doing with the compromise agreement is you’re contracting the employee out of the claims that they’re bringing.
As you know, under a compromise agreement, the employee has to be independently advised by a lawyer and the lawyer has to sign to say that they’ve provided that independent advice. So, it’s a failsafe for the employer. Certainly, if the employer wants a smooth, clean exit—I almost said Brexit there—but a smooth, clean break and doesn’t want any fallback or doesn’t want the hassle or the concern that in three months’ time, I’m going to get an ET1 from the tribunal, that’s certainly the best way to go down.
Just a couple of other points on that—obviously, whenever you’re looking up redundancy, you’re still doing your best for the employee. You’re giving them time off in terms of attending job interviews or going down to the local job centre in order to seek employment or if there’s training that can be provided, some employers will provide assistance in terms of outplacement. Outplacement could be helping the employee write their CV or alternatively giving interview skills and things like that.
So, there are things the employer can do there. Importantly, for me, what stands out is complete your consultation period before you confirm the redundancy. It’s a mistake that I see happening over and over and over again with employers. Complete that consultation, take everything into account and make an informed decision at the end of that before declaring their actual redundancy.
Scott: Again, importantly in Northern Ireland, not so important in England, but certainly important in Northern Ireland is that when you invite the person in for the meeting, you should not have made the decision that they’re going. It should be you could be going because if you’ve already made your mind up, it’s automatically unfair and you’re looking at, because you’ve breached the procedures, a potential 50% increase of any award.
Seamus: Absolutely. The tribunal do have the authority to increase up to the 50% and in some circumstances where they see the employer has deliberately taken steps like this, they will punish the employer in terms of it. The other aspect is making sure you’re paying all the entitlements the employee is entitled to. You’re looking at their redundancy payment, whether that’s the statutory redundancy or whether there is an enhancement package within the contract.
Their notice entitlement and their holidays, their bonus and then obviously the last area is make sure that you offer the right of appeal. There can be too much of a wiping of the brow to get the process complete and people forget about the last stage in terms of the appeal. So, it’s really important that you’re remembering the simple three stages. This is a dismissal and it requires the statutory procedure to apply to it.
More on Redundancy & Reorganisation
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- Implementing Redundancies: Five Questions to Ask Yourself to Ensure a Fair Process
- When can LIFO be used in a redundancy selection in Northern Ireland?
- Employment Law Discussion of Home-working, Cash Shortages and Redundancy
- Gorton v TJ Crompton Ltd 
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