Unfair dismissal claims constituted 47,900 of all Employment Tribunal claims in 2011-12. Of these, 41% settled before the Employment Tribunal and 8% were successful at the Employment Tribunal itself. However, a huge amount of potential unfair dismissal claims (particularly redundancy claims) are “settled” through compromise agreements without recourse to Employment Tribunal proceedings. Compromise agreements can be a very efficient way of achieving a good outcome for both an employer and an employee if the employment relationship is ending. Equally, they sometimes aren’t the best result, particularly if the employee is being undercompensated as a result of the compromise agreement. In this post we’ll therefore take a look at what issues will normally determine whether an employee should compromise their unfair dismissal claim or not. This will involve an examination of:
- Does the employee have a potential unfair dismissal claim?
- Is the employee’s unfair dismissal claim a strong one?
- What compensation could the employee receive in an unfair dismissal claim?
- What mindset is the employee in?
- What value does the compromise agreement put on the case?
- Is the termination of the contract of employment acrimonious or not?
Does the employee have a potential unfair dismissal claim?
This is probably the most important element of the analysis. If the employee doesn’t have a strong case for an unfair dismissal claim then the employee is in a weak bargaining position regarding their compromise agreement. This means that potential compensation received for the compromise agreement will be low and the employee may be obliged to enter into a number of potentially adverse restrictive covenants relating to their employment.
Is the employee’s unfair dismissal claim a strong one?
If the employee has a reasonable unfair dismissal claim then they will, as above, be in a stronger bargaining position relating to their compromise agreement. This will mean that they are able (or their compromise agreement solicitor is able) to negotiate better terms in their compromise agreement. In order for an employee to succeed in a claim for unfair dismissal their employer must have either procedurally unfairly dismissed them or substantively unfairly dismissed them (or both).
What compensation could the employee receive in an unfair dismissal claim?
This is a rather wide question and depends on a number of factors, including, among others, the strength of the unfair dismissal claim and the personality of the employee. The maximum compensatory award for an unfair dismissal claim is £72,300. If an employee is attempting to claim for more than this (and they don’t have an ancillary claim i.e. discrimination or breach of contract) then attempting to claim for more than this is bad tactics. Further, the median award for an unfair dismissal claim in the Employment Tribunal is currently approximately £5,000. Employees should therefore be prepared to (reasonably) temper their expectations as to the payout they can expect to receive in their compromise agreement.
What mindset is the employee in?
If the employee is determined to take the case to an Employment Tribunal, regardless of the strength of their case or the amount of money they’re being offered in a compromise agreement, then this puts both the employer and the employee’s solicitor in a difficult position. One of the most important things in a circumstance such as this is to be reasonable – hard-headedness is often a destructive quality (and this is said with the caveat that it’s understandable that the employee will often be emotional if they’ve been fired or are about to be fired).
What value does the compromise agreement put on the case?
Once reasonable compensation for the unfair dismissal case has been determined this should be compared with the amount that the employee is being offered in the compromise agreement. If the figures are poles apart then it’s unlikely that a suitable compromise can be reached for both parties.