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Labour & European Law Review

14th February 2013 - LELR Weekly Issue 306



Settlement Agreements Code consultation

ACAS is consulting on the Code of Practice for Settlement Agreements, or “protected conversations” as they were originally proposed as.

Settlement agreements will be able to be offered by employers to end an individual’s employment, without the offer being able to be used as evidence should the employee pursue an unfair dismissal claim to an employment tribunal.

Provisions for introducing settlement agreements are contained in the Enterprise and Regulatory Reform Bill currently before Parliament.

The consultation, which ends on 9 April, asks what the code, and accompanying non-statutory guidance, should cover, including:

  • Whether the code should include statutory requirements such as putting the agreement in writing and that the employee should receive independent legal advice;
  • Whether the code should contain good practice guidance on how settlement agreements should be offered and discussed;
  • The wording of the template letters from employers making the offer of a settlement agreement;
  • Whether the template letters are included in the code or the non-statutory guidance;
  • Whether the code should include a minimum time period for considering a settlement agreement offer and how long that should be;
  • Whether the code should include a good practice recommendation that employees are allowed to be accompanied at meetings to discuss settlement agreements;
  • Whether there are additional examples of what constitutes improper behaviour and undue pressure (to those in the consultation) by an employer.

Victoria Phillips, head of employment rights at Thompsons said: “The government has sought to present settlement agreements as just a different name for compromise agreements, when the reality is they are a lever to get rid of perceived problem employees without bothering with due process.

“ACAS is suggesting a series of template letters in which the employee is told their boss has concerns about their performance or conduct or whatever and that they have a choice to attend a meeting with the employer to discuss this, or they can consider an offer to leave on agreed terms. The big risk is, if the employee is not told the detail of the concerns or what information the employer holds about them then they will be unable to assess risk and may feel pressurised to accept something that is not in their interest.”

Please visit the acas website to downloaded the consultation document

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Causal link

Under the disability provisions of the Equality Act 2010, claimants have to show that their impairment has a substantial and long-term adverse effect on their ability to carry out day-to-day activities. In Sussex Partnership NHS Foundation Trust v Norris, the Employment Appeal Tribunal (EAT) said that although the condition itself does not have to directly cause the adverse effect, the evidence must show a causal link between them.

Basic facts

In 1997, Ms Norris, who had worked for the Trust since April 1995, was diagnosed with Selective IgA, a defect of the immune system. As this meant she was more susceptible to diarrhoea and upper respiratory infections, she had to take preventative antibiotics.

In July 2010 she applied for and was provisionally offered the job of Team Administrative Co-ordinator with the Trust, subject to satisfactory references. However, it then withdrew the offer because one of her referees referred to her disability and she brought a claim of disability discrimination.

The Trust agreed that she had a physical impairment within the meaning of section 6(1)of the Equality Act but denied that she was a disabled person within the meaning of the Act.

Relevant law

Sections 6(1) of the Equality Act 2010 states that a person has a disability if they have a physical or mental impairment which has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities.

Section 6(2)(2) states that the impairment will still be treated as having a substantial adverse effect on the person’s ability to carry out normal day-to-day activities if it clears up, but is likely to recur.

Section 6(5) states that an impairment will still be deemed to have a long-term adverse effect if the person were to stop taking the “measures” that they need to “treat or correct it”.

Tribunal decision

The lay majority (the judge disagreed) of the tribunal held that, if Ms Norris failed to take her medication, she would be prone to infection which would have a “severe impairment” on her ability to work and would have to take sick leave.

It concluded, therefore, that Selective IgA had a substantial adverse effect on her ability to carry out day-to-day activities. The tribunal also found that, as the infections were likely to recur, the effect was long-term. The Trust appealed both these findings.

EAT decision

The EAT overturned the tribunal’s decision, saying that there must be evidence to support a causal link between the impairment and the substantial and long-term adverse effect on the person’s ability to carry out day-to-day activities.

Although the medical evidence supported a link between Selective IgA and infections which might affect Ms Norris’ ability to work, the medical expert had not answered the question as to whether more frequent infections would result in a substantial adverse effect on her ability to carry out normal day-to-day activities. The EAT found the evidence as a whole (including Ms Norris’ account) did not support the tribunal’s conclusion that increased frequency of infections would result in a substantial adverse effect on her ability to carry out day-to-day activities.

The EAT also found that there was insufficient evidence to support the conclusion of the majority of the tribunal that the adverse effects of her impairment were likely to recur as there was only one three-month period in 2007 in a life span of 40 years when it had the required effect on her ability to carry out day-to-day activities.

It remitted the issue of whether Ms Norris was disabled for the purposes of the Act to a fresh tribunal.



Whilst at first blush this is a disappointing result for disabled employees, all is not lost. The decision shows how important it is to support the medical evidence with detailed factual background of the actual effect and recurrence. As the claim will be reheard Ms Norris can put her case again, following the EAT guidance. It is also worth noting that Ms Norris was not represented, highlighting the importance of effective trade union representation in these difficult cases.

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Covenant to sue

When an undertaking transfers from the ownership of one company to another under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), the obligation to consult is shared jointly and severally by all potential employers involved. In Tamang and anor v ACT Security Ltd and Euro Storage UK Ltd, the Employment Appeal Tribunal (EAT) said that a compromise agreement with one employer did not automatically bar a claim against another.

Basic facts

Mr Tamang and Mr Welilaka worked as security guards for Reliance at a site in Wembley.

On 1 April 2010, the owners, Segro, leased the site to Euro Storage UK Ltd. The two men were then told, without any prior notice, on 1 June 2010, that ACT Security Ltd had taken over responsibility for providing security at the site under a TUPE service provision change and they would no longer work for Reliance.

The two men brought a claim for failure to consult against ACT, Reliance and Euro on the basis that they were jointly and severally liable; and against ACT for unfair and wrongful dismissal. They then reached a compromise agreement via ACAS with Reliance which did not include ACT or Euro.

Along with a payment to each of the men, the agreement stated that it was “in full and final settlement of the Proceedings and of any claim he has or may have against the Respondent and/or the Group or any of their officers, staff or agents arising out of his employment or its termination or transfer to a third party including as non-exhaustive examples, any claim for a protective award for failing to consult, unfair dismissal, wrongful dismissal, breach of contract howsoever arising, discrimination or victimisation of any kind, redundancy pay, unlawful deductions from wages.”

Solicitors for the men and for Reliance wrote to the tribunal requesting that the tribunal dismiss the claim against Reliance only, as a result of the compromise agreement.

Tribunal decision

Relying on the legal reference book, Chitty on Contracts, the tribunal cited the rule that the discharge of one “joint debtor” discharges all debtors in accordance with the general principle that joint liability creates only one obligation.

It therefore decided that as there was only one “debtor”, then all three parties had been released as a result of the agreement with Reliance.

EAT decision

The EAT, however, disagreed, holding that the tribunal judge “miscategorised the compromise agreement” as it was not a release from a debt obligation, but a covenant not to sue.

Both the construction of the agreement and the joint letter itself (which referred to Reliance “only”) pointed to the conclusion that the agreement was an express covenant with Reliance which released it from any obligations it had to the men. The EAT also pointed out that there was no joint and several liability for the dismissal claim, and the tribunal judge’s finding that there was affected his approach and may have led him to fall into error.

Reliance was therefore no longer part of the proceedings and the claims against ACT and Euro should be restored.



This case provides confirmation that a claim can be settled against one party when liability is potentially joint and several, but depends on the terms used to settle such claims. The principles may be equally applicable to discrimination claims involving more than one respondent (employer). Although ultimately the claims against ACT and Euro were restored, the EAT also went on to say that “It may be that the monies paid to the Claimants will be brought into account by a Tribunal when it considers what is just and equitable to award them if they succeed in their case…”. So the EAT appeared to suggest that although the claim could be reinstated against the other respondents, this did not mean that the money could not later be taken into account by the tribunal when determining the appropriate compensation.


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