An NHS Trust has been told that it must uphold its compromise agreement with a former employee that was unusually generous to the employee, despite seeking to rely on its duties as a public authority to avoid it. The employee agreed to quit her job on the basis that she would receive a payment that exceeded the notice pay due to her, plus the maximum compensation for any successful unfair dismissal claim.

Following the employer not paying the full amount, the employee brought a claim which the employer defended on the grounds that paying the full amount would breach its duty to make reasonable decisions and not be 'irrationally generous'. The Court decided that the agreement was not 'irrationally generous' and noted that public authorities will not be allowed to escape commercial commitments.

Public authorities should therefore take care when agreeing the terms of a compromise agreement as it seems that they cannot automatically rely on their public role to escape from a bad deal.

Gibb v Maidstone and Tunbridge Wells NHS Trust, Court of Appeal