In Hinton v University of East London, the Court of Appeal has clarified the long running debate on how detailed a compromise agreement needs to be so that it "relates to the particular proceedings" and complies with section 203 of the Employment Rights Act 1996. The key issue has been whether a compromise agreement can rely on a "rolled-up" expression such as "in full and final settlement of all statutory rights" to settle unspecified claims.
The Court of Appeal has made it clear that "rolled-up" "catch-all" expressions do not comply with the proper construction of section 203, which require the agreement to "relate to the particular proceedings", as they do not sufficiently identify the particular proceedings the agreement is intended to compromise.
Lord Justice Mummery set out the following guidance: If actual proceedings are compromised it is good practice for the particulars of the proceedings and of the particular allegations made in them to be inserted in the compromise agreement in the form of a brief factual and legal description. If the compromise is of a particular claim raised which is not yet the subject of proceedings, it is good practice for the particulars of the nature of the allegations and of the statute under which they are made or the common law basis of the alleged claim to be inserted in the compromise agreement in the form of a brief factual and legal description. Lady Justice Smith added that it was not good practice for lawyers to draft a standard form of compromise agreement which lists every form of employment right known to the law. Compromise agreements should be tailored to the individual circumstances of the case.
The consequences of this judgment are that, in future, employment tribunals are likely to take a dim view of standard forms of compromise agreements which list employment rights, irrespective of their relevance to the proceedings. They will expect compromise agreements to be tailored to the individual circumstances of the case, setting out brief factual and legal descriptions of the specific claims which are being settled. Employers will need to think much more carefully about the wording of compromise agreements and review any standard agreements they use.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 16/05/2005.
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This case is significant because it creates an exception to the general principle that an agreement to negotiate is unenforceable.
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