August 30, 2013

Settling Employment Disputes

The introduction of settlement agreements provides employers with a mechanism it can use to end employment in a clean fashion.

While also preventing the employee from being able to raise an Employment Tribunal claim.

Another way employment can end is by mutual agreement, which is where the employer and employee both agree that the employment should end. In such circumstances this is not classed as a dismissal and an employee would not be successful in any claim to an Employment Tribunal.

However, the facts and events leading up to the end of employment are of paramount importance and if it is found that based on an examination of events there is no mutuality of agreement then the employee will be considered to have been dismissed, possibly unfairly.

A recent case at the Employment Appeal Tribunal (EAT), Francis v Pertemps Recruitment Partnership Ltd considered whether a certain set of circumstances resulted in termination by mutual agreement or were a dismissal.

F worked for P as an administrative assistant under the direction of a specific client. After two and half years the client no longer required F’s services, so P presented two options to him; 1) two weeks notice plus redundancy pay or 2) two weeks notice with P attempting to find other work and F then entering into a new contract in order to do that work.

F chose option 2. Though there was the appearance of mutuality, P used words such as “notice” and “redundancy” in its letter to F while also advising he had a right of appeal against the “redundancy decision.” F did exercise his right of appeal, but it was unsuccessful.

F claimed unfair dismissal but this was rejected at Tribunal as it was deemed that the two parties had mutually terminated the contract and consequently there was no dismissal. This was because the Tribunal did not consider that F was under any pressure to end the contract, there was no likelihood of further work and he had chosen redundancy to claim Job Seekers Allowance.

The Tribunal did not consider s95 Employment Rights Act 1996 which states that an employee is dismissed…if…the contract under which he is employed is terminated by the employer whether with or without notice.

F appealed to the EAT who decided that if an employee resigns in circumstances where he is advised he will be dismissed if he does not resign, the mechanics of the resignation do not cause it to be anything other than a dismissal. A Tribunal should look to the cause of the resignation and why it has been effected in making a decision of mutuality of agreement.


The appeal was allowed and the case remitted to another Tribunal to consider the fairness or otherwise of the dismissal.


Essentially, this case tells all employers that while it may believe there has been mutuality of agreement, a Tribunal will forensically examine the events leading up to the employee leaving the employers employment and if there is any element of the employee exercising unfettered choice to leave his employment; it may consider it to be a dismissal – unfair or otherwise.


In the event that you believe you are reaching the point where you believe you are reaching agreement with an employee that his or her employment may end please take advice from the Moorepay Compliance Advice Line to ensure that it really is a mutual agreement.


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