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Ask Employment Law |
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Remember: There is no substitute for legal advice on the actual
situation you find yourself in. The information posted on this site is for general
information only, is based on |
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Question: |
I signed a compromise
agreement, now the company is saying I have to repay all the money because I
breached a clause. |
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Answer: |
Compromise Agreements settle
statutory claims arising from someone’s employment or its termination, for
which the employee has to get independent legal advice before accepting a sum
of money. If there’s a carrot (the money), there’s generally also a stick
& many compromise agreements have a clause saying (words to the effect
that) breach this agreement, and all the money is repayable as a debt.
The question of whether such a
clause is enforceable came up in the Court of Appeal decision in CMC Group
plc v Zhang 2006. Mr Zhang signed an agreement confirming that all of the
settlement money would be repayable if he broke any terms in the agreement.
CMC claimed that he had breached the non-derogatory comment clause and sued
for repayment of all the money under the agreement (a tidy $40,000). The Court of Appeal held that
this was an unenforceable penalty clause as the repayment of all sums under
the agreement was excessive in relation to a claim arising from the breach.
At the time of writing the case is being appealed to the House of Lords, but
if your ex employer is trying to rely on such a
clause for the repayment of all the money under the agreement, it is quite
possible that the clause will not be enforceable. In Collidge
v. Freeport plc 2008, the Court of Appeal held that if the former employee
him or herself was in breach of the terms of the compromise agreement, the
employer did not in turn have to comply with it. In that case the employee was in
breach of a term included in that agreement to the effect that he had not
previously committed any repudiatory breaches of
his contract of employment that would have entitled the employer to terminate
his employment. In other words, the employer may
not be at fault by failing to pay the sums due under the contract if the
employee him or herself is in breach of the
agreement. See also our general page on
what goes into a compromise
agreement and where to get
advice on compromise agreements Last reviewed: July 2010. |
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Employment
Solicitor Reculver Solicitors Tel
0207 324 6271 Regulated
by the Solicitors Regulation Authority ©
Reculver Solicitors. 2005- |
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