As the recession looms there will be many employers wishing to relieve themselves of staff to save costs. Many will prefer their employees to leave voluntarily and to sign compromise agreements. These when properly made lawfully prevent employees going to employment tribunals to  contest the circumstances of their leaving. Employers will sweeten the pill by agreeing to pay and ex-gratia lump sum. Barristers through the direct access scheme are amongst qualified lawyers who are allowed to sign these agreements to make them lawful as preventing employees from going to employment tribunals.

In case an employee has in fact been guilty of some behaviour which would otherwise have entitled the employer to dismiss, prudent employers can include a clause or warranty to the effect that the money payable under the compromise agreement will not in fact be paid if it is discovered that indeed the employee has been guilty of something which would have given the employer the right to dismiss. Such a clause can be termed a warranty along these lines, the employee agreeing as follows:

"You warrant as a strict condition of this agreement that there are no circumstances of which you are aware or of which you ought reasonably to be aware which would constitute a repudiatory breach on your part of your contract of employment which would entitle or have entitled the company to terminate your employment without notice."

In Collidge v Freeport plc [2008] IRLR 697 an employee was found to have been guilty of financial impropriety prior to a payment of £445k, under a compromise agreement and so no payment was made by the employer. The Court of Appeal upheld the judge's unsurprising finding that such a clause was a condition precedent for payment under the compromise agreement and the employer did not have to make the payment. Mr C's warranty was a condition, a sina qua non, of the employer's obligations to pay. The warranty was a pre-condition of the employers liability to perform its obligations under the contract.

Writen by Robert Rees, Barrister at New Walk Chambers, specialising in direct access, employment law and compromise agreements.