Compromise agreements: tribunal can declare a compromise agreement void
In Industrious Ltd v Horizon Recruitment (in liquidation) and Vincent the claimant had ceased to be employed shortly before what she alleged was a TUPE transfer. She brought tribunal claims against both transferor and transferee which were settled by a compromise agreement under section 203 of the Employment Rights Act 1996.
It was a term of the agreement that the transferor would pay her a sum in excess of £40,000. About a month later, the transferor went into creditors' voluntary liquidation. She wanted the agreement to be set aside (presumably so that she could bring a fresh claim against the still-solvent transferee). She claimed that the agreement was unenforceable on the grounds of misrepresentation even though it complied with section 203. Her case was that when the agreement was entered into, both the transferor and transferee must have known that the transferor could not comply with the payment provisions.
The EAT had to consider one preliminary point only – did an employment tribunal have jurisdiction to hear such a claim? They held that it did.
Point to note –
- Employee claims can be validly compromised provided that the agreement complies with section 203. However, this case is a reminder that other legal rules also apply to such agreements. They may be set aside if entered into under duress or (as in this case) in reliance on a misrepresentation of relevant facts. We are happy to provide further advice if required.
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