Ireland: Tips On Full And Final Settlement Clauses

In two recent cases, the Employment Appeals Tribunal ("EAT") highlighted the importance of informed consent in the context of employees signing full and final settlement waivers. 

In recent EAT cases involving separate claims taken by two employees against the same employer, a chemical and laboratory equipment supplier ("the employer"), issues were raised by the employer at the outset of the proceedings that the EAT had no jurisdiction to hear the claims brought against it under the Unfair Dismissals Acts 1977 to 2007 ("the Acts"). This was on the basis that the employees had signed severance agreements, containing full and final settlement clauses, which excluded claims under the Acts.

Case 1

Facts

On 6 February 2015, the employee was invited to a meeting with the HR Manager and the Commercial Director of the employer. She was informed that her position was being made redundant, effective that day, without prior warning. Although the HR Manager read through a letter and some documents, the employee maintained she was in shock and did not absorb their contents. 

The employee was advised to phone her husband but she had no recollection of being advised to seek legal advice. 

After an hour or so, the employee returned to the HR Manager's office and signed the documents without the benefit of legal advice. She was provided with cheques in respect of her statutory entitlements and an ex gratia payment.

One of the documents signed by the employee contained a waiver of claims and listed the relevant legislation in respect of which the employee was waiving her claims against the employer including those under the Acts.

The document also stated as follows: 

"I acknowledge that I understand the effect and implications of this agreement and confirm and agree that I have been afforded the opportunity of obtaining independent legal advice regarding the contents and effect of this agreement".

Case 2

Facts

On 6 May 2015, the employee was invited to a meeting with the Managing Director and the Operations Manager and informed that her position was being made redundant. This was effective that day and without any prior notice. The employee was provided with some documents to sign and cheques in respect of her statutory entitlements and an ex gratia payment. The meeting did not last more than seven minutes in total.

The employee was not advised to read the documents nor did the Managing Director or the Operations Manager offer to read them out to her. She was not given an opportunity to take the documents away to consider them and was not advised to obtain legal advice. Feeling like she had no option, the employee signed the documents.

One of the documents signed by the employee contained the same waiver of claims and confirmation as in case 1 above.

Decisions

In both cases, it was held that the employees were not capable of giving informed consent at the time of signing the full and final settlement clauses and that accordingly, the EAT had the jurisdiction to hear the claims under the Acts.

In case 1, the EAT stated as follows:

"Obtaining informed consent is not a matter of rushing through a number of cursory steps but a matter of making a genuine effort to enable the employee to take the necessary steps to realise what she is being asked to do when she signs the document containing a full and final settlement clause".

The EAT subsequently awarded the employees €20,000 and €15,000 in cases 1 and 2, respectively, in compensation for unfair dismissal in addition to the amounts already paid under the severance agreements.

Conclusion

In light of the above, we have outlined some tips for employers to consider when entering into an agreement with an employee containing a full and final settlement clause in order to minimise the risk of the waiver of claims being found to be unenforceable at a later date: 

  1. All statutes in respect of which the employee is waiving claims should be listed in the agreement;
  2. The employee should be invited to bring a competent representative along to the relevant meetings;
  3. The employee should be advised, and afforded with a reasonable opportunity, to obtain independent legal advice in advance of signing. This advice from the employer is often supported by a contribution towards the cost of obtaining such legal advice;
  4. The employee should be allowed a reasonable period of time to consider the agreement generally in advance of signing. What is 'reasonable' will depend on the circumstances, however, a few days is a good rule of thumb; and
  5. Upon signing, the employee's signature should be witnessed. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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