The Court of Appeal unanimously upheld the High Court's decision that an employer did not have to make a payment due under a compromise agreement because the employee was in breach of a warranty he had given as part of the compromise agreement.
The warranty, a common one in compromise agreements, was that the employee was not aware of anything that would constitute a breach entitling the employer to dismiss him summarily. It subsequently transpired that the employee had committed such a breach.
This case highlights the importance of ensuring that the payment provisions contained in the compromise agreement are directly linked to the employee’s warranty. This will have the effect of making compliance with the warranty a prerequisite to payment under the agreement, or giving employers grounds to sue for repayment of the sums paid if misconduct is subsequently discovered.
Collidge v. Freeport plc