Settlement agreements

When is a signed agreement not an agreement?

Settlement agreements can be an effective way to avoid a costly law suit. They are used a lot in Ireland to compromise a legal action.The standard agreement usually provides for the payment of a sum of money by the employer, in return for the employee undertaking not to proceed with a legal claim. So how can a signed agreement, where the requisite money has changed hands be overturned by the courts?

The main basis for the courts to uphold a settlement agreement is that the employee must give “full and informed consent” This was considered in the case of Sunday World Newspapers Limited v Kinsella and Bradley (2007). In that case the courts outlined what should be reflected in a proper settlement agreement.

The more recent case of Eoin Kerrigan v Smurfit Kappa Limited c/o Smurfit Kappa UD1921/2011, outlinews the importance of both sides obtaining independent expert advice. The employee succeeded in obtaining an award of €10,000.00 , in spite of the fact the he had already received from his employer,payment of €25,280.00 in full and final settlement of all claims arising from his employment with that employer. The employment appeals tribunal held that as he had not been advised in writing to seek appropriate advice before signing the waiver, the employee could bring a case under the Unfair Dismissals legislation and awarded him €10,000.00.

A further case of Healy v Irish Life Assurance (DEC-E2015-002) held that where all of the steps have been followed in a settlement agreement, it can withstand scrutiny. The settlement agreement was not overturned and the employee failed in his action.

The conditions generally required for the agreement to be enforceable are that:

• the agreement is in writing and signed by the employee,

• the claims being waived and discharged are clearly set out; and

• the employee has taken independent expert advice.

• the employee has had a reasonable period of time to consider the full consequences of their action in signing the settlement agreement. A number of days minimum is recommended.
• It can be helpful if the employer offers to make a contribution towards the cost of the employee's independent expert advice.
• All signatures should be witnessed.

Is there a precedent I can use to draft a settlement agreement?

We recommend that you talk to one of our experts when preparinga settlement agreement.

However if you want to do it yourself you can download our updated settlement agreement, which comes with our simple guide to completing it . You can opt to have the completed document reviewed by one of our experts for peace of mind. Just click on the green button  below, to help reduce your legal expenses.

In the light of this all employers should proceed with caution when settling a case. Take care, take advice and make sure that the employee does so too.

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