Today’s Hot Topic from Crowley Solicitors focuses on the best approach to a situation where an employee is being asked to sign a document waiving their entitlement to take a claim against their employer:

The recent Employment Appeals Tribunal decision inEoin Kerrigan v Smurfit Kappa Ltd, c/o Smurfit Kappa UD 1921/2011 has once again highlighted the importance ensuring an employee has access to independent legal advice when being asked to sign waiver documents or any other documents flowing from the termination of their employment. The absence of such independent legal advice could leave an employer in a situation where, notwithstanding the fact that an employer has signed a ‘full and final’ settlement agreement, the absence of informed consent could leave an employer exposed to a subsequent claim by an employee in respect of the termination of their employment.

In this Hot Topics article, Deirdre Crowley and Emer O’Sullivan provide an overview of this recent decision and the established position in relation to the need for independent legal advice and offer suggestions as to how an employer can best approach a situation where an employee is being asked to sign a document waiving their entitlement to take a claim against their employer following the termination of their employment.  

Eoin Kerrigan v Smurfit Kappa Ireland Ltd, c/o Smurfit Kappa – UD 1921/2011

In this case, a former employee was awarded €10,000 by the EAT, despite the fact that he had previously accepted the sum of €25,280 ‘in full and final settlement of all claims’ arising out of his employment with Smurfit.

This case concerned a redundancy and the claimant’s claim that his selection for redundancy was unfair. While the EAT concluded that the selection of the claimant for redundancy was not unfair, there was a lack of ‘fair or any procedures surrounding the dismissal’. For the purpose of this article, the EAT’s comments in respect of the previous settlement reached between the parties are of particular note.

In the case the respondent raised a preliminary issue that the EAT had no jurisdiction to hear the matter as the claimant had previously signed a Discharge Form and accepted a settlement payment from the respondent in full and final settlement of all claims arising from the termination of his employment. The EAT considered the evidence in relation to the signing by the claimant of the Discharge Form in dealing with this preliminary issue.

On 7 September 2010 the employee, who worked in the respondent’s Waterford office, was called to a meeting with the general manager and the regional sales manager of the respondent in the Cork office the next day. At this meeting the claimant was informed that his position was being made redundant due to a restructuring. The claimant was shocked and upset at this news and he contacted the regional sales manager the following day and was invited to a further meeting on 10 September 2010.

At this meeting on 10 September 2010, which was again attended by the claimant, the regional sales manager and the general manager, the claimant refused to sign the Form RP50 as the date of termination and the monetary calculations included in this Form were incorrect. The claimant was then handed a Discharge Form to read and, having read to where the settlement figure was set out in the Form he saw that this figure was also incorrect and he did not read the rest of the Form and he refused to sign this Form. The claimant’s position before the EAT was that he was informed that if he did not sign the Discharge Form that he would not receive the ex gratia portion of his redundancy payment. The claimant also denied the assertion of the general manager of the respondent that he had gone through the Discharge Form with him.

A further meeting was held on 14 September 2010 at which the claimant read the Discharge Form in full and signed it, as well as the Form RP50. The Discharge Form in question confirmed that the claimant was accepting the sum of €25,280.76, ‘in full and final settlement of all claims arising out of my employment with [the respondent] or the termination thereof, both under statute and under common law in all respects for all purposes’.

This Form also stated that the settlement sum was inclusive of but not limited to any rights the claimant had or may have under a number of acts, including the Redundancy Payments Act 1967-2003 and the Unfair Dismissals Acts 1977-2001. The Form further stated ‘I confirm that this document has been read over and explained to me prior to my signing it and that accordingly I both understand and accept the contents of this document in full’.

At the hearing before the EAT the respondent contended that the claimant had negotiated the settlement figure. The EAT noted that the claimant was not advised to seek advice before signing the Discharge Form and this was a key factor in their decision.

The EAT made reference to the judgment of Buckley J in Hurley v the Royal Yacht Club (1997 ELR 225) during which the judge considered a waiver clause in an agreement in the context of the Unfair Dismissals Acts and concluded that there must be informed consent to such a waiver. Buckley J also set out what such informed consent requires, stating:

‘ the applicant is entitled to be advised of his entitlements under employment protection legislation and that any agreement or compromise should have listed the various Acts which were applicable, or at least made it clear that they had been taken into account by the employee. I am also satisfied that the applicant should have been advised in writing that he should take appropriate advice as to his rights, which presumably in this case, would have been legal advice.’

In the Hurley case, Buckley held that there was an absence of such advice and so the agreement was void. This statement of law was subsequently applied by Smyth J in the High Court in Sunday Newspapers Ltd v Kinsella and Brady [2008] ELR 53.

The EAT noted that the test in Hurley is twofold, i.e. (1) that the employee should be advised of his entitlements under employment legislation, with any agreement listing the various applicable acts or at least making clear that the employee should take them into account and (2) the employee should be advised in writing that he should take appropriate advice.

The EAT held that notwithstanding that the unfair dismissals acts are specified in the waiver clause, it was not sufficient to deny jurisdiction as the second element of the Hurley test had not been satisfied. The EAT stated that in ‘what is frequently a traumatic situation for an employee it is vital that he be advised to seek appropriate advice. It was common case that such advice was not given to the claimant. Accordingly the Tribunal finds that it had jurisdiction to hear this appeal’.

Other relevant EAT decision on independent legal advice

The facts of the Kerrigan case are in contrast to those in another EAT decision, Angela Thompson v County Wexford Education Centre UD 581/2012, which also involved a disputed redundancy and a prior ‘full and final’ settlement. In this case the respondent also made a preliminary argument that the EAT did not have jurisdiction to hear the matter as a signed severance agreement existed in full and final settlement of any claims.

In this case the claimant was called to a meeting with the management committee where she was informed that her position was being made redundant. She was provided with a severance agreement and told to take a week off and to take legal advice. The severance agreement was not reviewed with the claimant at this meeting. The claimant gave evidence at the hearing that at the time she signed the documents she was satisfied that her position was redundant but later it came to her knowledge that the position still existed. She also understood that if she did not sign the documents she would not even receive her entitlements.

The severance agreement itself allowed for the claimant to enter the name of the person from whom she had sought independent legal advice and the claimant entered a name (BH) in this section and returned the agreement to the respondent. The claimant gave evidence that she spoke to BH on the telephone about the redundancy but not about the ex gratia part of the agreement. The claimant also spoke with her union representative when she received the documents. In considering whether the respondent was entitled to rely on the severance agreement the EAT considered matters such as:

·  Was there consideration?

·  Are any issues of capacity raised?

·  Was the claimant’s consent informed?

·  Is the agreement clear as to the rights (and legislation) waived?

·  Was there written advice that the employee should take independent legal advice?

In coming to its decision the EAT was satisfied there were no issues in relation to capacity or consideration, particularly in light of the fact that the claimant had consulted with a legal advisor. In respect of the other items considered, the EAT made specific reference to the fact the agreement itself was clear and that the claimant was not only verbally advised to take independent legal advice but also in writing and the claimant herself informed the employer that she had taken independent legal advice.

In finding that the EAT did not have jurisdiction to hear the case it commented that ‘[a]ll indications are that the consent of the claimant when signing the document was informed as she had spoken with both the union when she received the documentation and with BH, and the employer was entitled to believe that this was the case’.

Best Practice

These cases emphasise the importance of informed consent when employees are signing severance/waiver agreement. The most prudent way to ensure that the consent of the employee is informed is to advise them to seek independent legal advice, and to make specific reference to the fact that the employee has taken or has been given the opportunity to take independent legal advice in the relevant waiver agreement.

It may also be prudent for employers to make a contribution (e.g. €200-300 plus VAT) to the cost of such independent legal advice, upon receipt of a vouched invoice, to ensure that the employee has access to independent legal advice. Taking these steps should help to give an employer comfort that the ‘full and final’ settlement element of any such agreement will be upheld if the employee subsequently seeks to renege on this agreement on the basis that they did not understand what they were signing or the nature of the rights being waived.

For further information please contact Deirdre Crowley at dcrowley@crowleysolicitors.ie or Emer O’Sullivan at eosullivan@crowleysolicitors.ie