An Uncompromising Approach to Severance
ANDY COULSON, the former News of the World editor and David
Cameron's former Director of Communications, has now been granted
permission to appeal against a High Court decision that News Group
Newspapers (NGN) does not have to pay all his legal costs over the
phone-hacking affair. The Court of Appeal said that Coulson
had an "arguable case" which should go before three judges at a
full hearing. Coulson resigned in February 2007, signing a
compromise agreement at the time and while his employers originally
agreed to support him, they stopped re-imbursement of his legal
expenses last August. He has since sued NGN over the
interpretation of a clause within his severance agreement dealing
with expenses.
Compromise agreements are often used to tie up severance
arrangements for senior executives and can provide a helpful device
for businesses to guard against claims in the Employment Tribunal
and courts. If properly done, they are the only valid means
by which an employee can be prevented from making claims for things
like unfair dismissal or unlawful discrimination. In return
for the protection they provide, there needs to be an incentive for
the departing employee as the rights being waived can be
valuable. This is why obtaining independent legal or trade
union advice is an absolute requirement to protect the
employee. Financial compensation is usually an element but
references, outplacement support, agreement on stock options and
other matters can all be covered. The key though, is to
ensure such agreements are properly and precisely drafted, as they
themselves can become the subject of litigation, as we've seen in
the Coulson case. They may also end up failing to achieve the
"clean break" for which they were originally intended as
we've also seen here.
It's also interesting to note that the Government is currently
looking at the possibility of simplified compromise agreements,
that may come in a standard format. The theory behind this
seems to be they will need little if any legal input thereby
cutting down on expense. Sadly, that may not be practical as
severance arrangements will often vary from situation to situation
and don't lend themselves to a "one size fits all" approach. They
are also to be renamed as "settlement agreements" as some people
did not like the concept of a "compromise".
For help with severance arrangements and compromise agreements
please contact a member of our employment team.
