Compromise Agreements and Independent Legal Advice

Introduction

A recent case before the Workplace Relations Commission (WRC) examines the factors that will be considered when deciding whether the WRC has jurisdiction to hear a complaint, despite the existence of a compromise agreement (often referred to as an exit, severance or settlement agreement) between the parties. 

Background

In An Administrative Assistant v A Charity (ADJ-00022029), the employee was employed by the employer from 23 April 2007 to 21 January 2019. The employee was invited to a meeting on 19 September 2018 for a chat about the future of the office, which ultimately led to her redundancy, in advance of which she was offered, and signed, a compromise agreement. However, she eventually took a claim for unfair dismissal, arguing that she wasn’t fully aware of the consequences of signing the compromise agreement. 

Compromise Agreements and Irish Employment Law

The employer denied the complaint of unfair dismissal. The employer said that the employee was dismissed due to a redundancy, which was a genuine dismissal and the procedures used were correct.

The employer relied on the compromise agreement signed by the employee on 7 December 2018, which waived future claims and specifically noted that the Workplace Relations Commission did not have jurisdiction to inquire into the complaint.

The Agreement provided:

“The Employee confirms that they have had the opportunity to receive independent legal advice with regard to both the meaning and effect of entering into this agreement and signing this document and has taken advice from their trade union. The Employee further understands and accepts the contents of this document in full”.

The employer relied on Hurley v Royal Yacht Club [1997] 8 ELR 225 which requires the agreement to specifically state the legislation the employee agrees to waive claims under, and that the employee is adequately advised. 

The employer disputed the employee was coerced into signing the compromise agreement and said her Trade Union official was involved in the consultation process from its commencement on 17 September 2018. On the basis the employee sought to avail of voluntary redundancy, the employer provided the compromise agreement and the employee procured a solicitor to understand the meaning and effect of the agreement in accordance with clause 7.

The employer also relied on Sunday Newspapers v Kinsella & Anor that the appropriate legislation to be taken into account by the employee is listed and it was not necessary that appropriate advice is professional legal advice in writing. The employee was notified that she was entitled to bring a work colleague or union representative to the meetings. In nearly all meetings the employee’s union official was present. The employer engaged in a transparent manner and examined all alternatives to redundancy including an offer of redeployment to another office and voluntary redundancy. 

The Workplace Relations Commission and Compromise Agreements

The WRC noted Section 13 of the Unfair Dismissals Acts 1977-2015, which provides:

“A provision in an agreement (whether a contract of employment or not and whether made before or after the commencement of this Act) shall be void in so far as it purports to exclude or limit the application of, or is inconsistent with, any provision of this Act.”

Judge Buckley in Hurley v Royal Yacht Club [1997] 8 ELR 225 considered the law in relation to a compromise agreement executed by an employee which did not specifically set out the waiver of his rights in relation to employment protection legislation. The Judge affirmed that employers and employees can compromise claims under the Unfair Dismissals Acts 1977-2015 but this must be in circumstances where the person has an informed consent.

The waiver of legal rights must specifically refer to the various Acts applicable, and the employee should be advised in writing that he should take appropriate legal advice as to his rights. This was endorsed by the High Court in Sunday Newspapers Ltd v Kinsella & Anor [2008] 19 ELR 53.

Conclusion

The WRC accepted the evidence of the employee that she did not receive either legal advice or advice from her trade union on the terms of the compromise agreement. In addition, the employee was impacted with a relevant medical condition at the time she signed the compromise agreement. Accordingly, the WRC found that it did have jurisdiction to inquire into this complaint.

However, luckily for the employer, the WRC found that the redundancy was a genuine one, that the employee concerned was fairly selected, and therefore, it did not uphold her complaint for unfair dismissal.