Is a compromise agreement fail-safe? Can things still go wrong?
Though it is rare, occasionally a problem can crop up so you must be sure of your facts and take care when choosing your professional adviser.
Normally both parties are keen for a comromise agreement to succeed, which gives it a head start over contracts where one party or the other feels it was a bad deal that should never have been agreed, and soon start hunting for ways to get out of it. Even so, it's necessary to be sure there are no grounds on which a compromise agreement could be challenged.
One possible question is whether an emloyer actually had the power at all to agree the Compromise Agreement. This is not normally an issue, but it led to a dispute that went all the way to the Court of Appeal in the case of Gibb v Maidstone & Tunbridge Wells NHS Trust before Ms Gibb was able to be sure the settlement she had agreed with the Trust was safe. It had been alleged that the settlement wass so lavish it has been beyod the authority of the Trust, even under a Compromise Agreement.
The Court of Appeal disagreed with the view of the High Court, deciding that the payment was not over-generous and the Trust was entitled to take into account Ms Gibb's good service and potential difficulties in getting a new job.
The decision was welcome for people dealing with termination packages in the public sector; but is also a reminder of the need to consider any negotiated settlement very carefully.
Private companies are not likely to be faced with questions of whether they have the power to make an award, but it is always worth being sure the person who is committing a business reallly does have the authority to deliver what is promised.
As for whether an employee is sometimes in the wrong, here's an interesting example from the sports world. Take one football club, a relationship that turned sour and a one million pound settlement.
Was The Manager Off-Side?
Even if employer and employee agree, and a solicitor ratifies the deal as a formal Compromise Agreement there will be times when either the former employee or the boss has second thoughts.
The formalities of the Agreement mean the terms are very seldom disputed once signed, but they certainly were in the case of Crystal Palace Football Club and their former manager, Ian Dowie.
Relations between Ian Dowie and the club's owner, Simon Jordan had been stormy for months and the arguments continued even after Dowie left before the end of his contract "to spend more time with his family".
Ian Dowie's contract had contained a clause saying Crystal Palace would be due 1,000,000 pounds if he left to join another club.
A compromise agreement was worked out and this allowed him to leave in order to spend more time with his family in Bolton.
But within a few weeks he turned up again in south London, as manager of Palace's arch-rivals Charlton Athletic a few miles away.
That was enough for Palace's owner, Simon Jordan to ask the High Court to release him (Simon Jordan) from the Compromise Agreement, which the judge did as soon as he was convinced that Ian Dowie had been less than reallyabout his intentions.
So how did the story end?
It isn't likely Crystal Palace ever got their ?1,000,000 compensation since Ian Dowie was fired by Charlton within a few months of joining them. But the club had its day in court and did its best to make life hard for its former employee.
So is a Compromise Agreement fail-safe? The fact is that like all other contracts, a compromise agreement is not immune from challenge where fraudulent dealings are alleged. Ultimately, like all contacts, they will only succeed if the business fundamentals are logical and the parties are clear about their intentions. Their overwhelming advantage is that they remove the uncertainty from a host of possible statutory claims, which must be good news for employer and employee alike.
For further information or help with drafting or concluding a Compromise Agreement please call us on 020 7274 0110 or write to guy.thompson@guyt.co.uk