Severance Agreements and the Importance of Independent Legal Advice

by

Keeling’s Retail Unlimited Company v Wasim Haskiya [2020] ADJ – 00012963/ UD/19/96

On the 17th August 2020, the Labour Court overturned[1] an adjudication officers decision from the WRC and awarded an employee [‘the claimant’] €50,000 pursuant to Section 8 A of the Unfair Dismissals Acts 1977 – 2019.

 

BACKGROUND

On the 18th August 2017, the claimant’s employment with the Keelings was terminated. 3 days prior to his termination the claimant was advised that his position was to be made redundant. On the same date the claimant was provided with a covering letter and the documentation setting out his statutory entitlement together with the detail of ex gratia arrangements that was proposed to apply post termination.

On the 17th August 2017, Keelings had a further meeting with the claimant. At this meeting the claimant made some factual corrections to his statutory entitlement and the calculation of same. These changes were agreed by Keelings. As such the claimant signed a “Terms of Settlement” which confirmed that the employee waived his statutory rights under the Unfair Dismissals Acts and other employment based legislation. As per the wording of the terms, the employee confirmed the following:

“I confirm that this document has been read over and explained to me prior to my signing it and that accordingly I both fully understand and accept the contents of this document in full”

Notwithstanding the above, the employer submitted that it had been reviewing the claimant’s position for a number of months and elected to make the role redundant, informing the claimant on the 15th and the termination taking effect on the 18th August 2017.

Keelings noted that the claimant was given two days between the above period to consider the matter and if he wished, he could of sought advice. Furthermore, the manager of the claimant encouraged him to avail of legal advice. The claimant noted that he did send an email to the finance director setting out that he did not accept the fact that his role had been made redundant.

During the claimant’s meeting with the Keelings on the 17th August, no confirmation was provided by the claimant or sought after by the employer to confirm whether he had received such advice. In fact, the claimant admitted that he had called several law firms in his locality on the 16th August, however was unable to get an appointment with a solicitor within the timeframe required. As such the claimant submitted that he felt under pressure to sign the agreement, given that he had family responsibilities which in turn placed him under economic duress.

 

COURTS DECISION

The Court noted that it was required to determine whether the signing of the Terms of Settlement, which waived the employees statutory rights under the Unfair Dismissals Act prohibited him from issuing a claim thereunder in the absence of legal advice.

The Court outlined the position on compromise agreements by referencing Section 13 of the Unfair Dismissals Acts. This provision states that where an agreement attempts to limit or exclude the application of the unfair dismissals legislation, said agreement shall be deemed void.

The Court held:

It is clear from the authorities that a provision in a statute prohibiting contracting out does not prevent parties from lawfully agreeing to settle or compromise claims based on the statute. There is, however, often a subtle but substantial difference between a genuine bargain to settle or dispose of a claim, which is lawful and enforceable, and an attempt to exclude or limit the Act, which is void and of no effect.”[2]

In summary the Court stated:

  1. The terms of any waiver must be construed strictly against the party from whom it emanated. Where there is doubt the course of negotiations between the parties should be examined so as to ascertain what was intended.
  2. An agreement to waive statutory rights must be supported by adequate consideration.
  3. The waiver should normally arise from an agreement reached as a result of meaningful negotiations and professional advice having been sought and given.
  4. The waiver should list the various Acts being taken into account.
  5. The waiver is only valid if it is based on a free and informed consent given by a person with full knowledge of their legal rights.
  6. It is for the employer to ensure that the worker is capable of giving an informed consent and the employer should normally advise the worker in writing to obtain professional advice before inviting him or her to sign a waiver.

 

A such, the Court determined that the document signed on the 17th August 2017, did not emerge from meaningful negotiations between the parties and consequently it must be construed strictly against the employer. Equally, no effort was made by the employer to ensure the claimant had sought legal advice – therefore there is no basis to conclude that the employees consent to waive his rights was based on free and informed consent given by him with full knowledge of his legal rights.

Due to the fact the employee was unemployed for a period of 3 months following his dismissal and he had also made attempts to secure employment throughout that time. Whilst he obtained a new role, the claimant was at annual loss of €25,000. As such, the Court measured compensation (which is fair and reasonable) to be €50,000, less the ex gratia of €20,000, meaning the claimant awarded €30,000.

[1] Section 9 ( 1) of the Unfair Dismissals Acts 1977 – 2019
[2] PMPA Insurance v Keenan & Ors [1983] I.R. 330, HC and [1985] ILRM 173, SC: Sunday Newspapers Limited v Kinsella and Bradley FTD6/2006 [2006] ELR 227 : Talbot (Ireland) Ltd v Minister for Labour and Others [1985] 4 JISLL 87: Donal Hurley v Royal Yacht Club [1997] ELR 225: Fitzgerald v Pat the Baker [1999] ELR 227

 

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