This week’s case roundup
Beware when negotiating exit agreements
Richardson (Inspector of Taxes) v Delaney, IDS Brief 691, High Court
Delaney’s employment was terminable by either party on 18 months’ notice,
although the company had a discretion to terminate with immediate effect by
making a payment in lieu of notice.
In December, rather than paying under the Pilon, the company gave Delaney
written notice of termination. At the same time it proposed settlement terms
which provided for termination by mutual consent that month on the basis that
Delaney would receive a compensation payment for loss of office of £68,001 less
tax, plus company car.
Delaney rejected the terms but pursued negotiations. Eventually an increased
payment of £75,000 plus the car was agreed and Delaney’s employment terminated
on 28 December.
The High Court held that as the negotiations led to a consensual termination
there was no breach of contract. The payment was therefore an emolument of
employment and taxable in full. The effect should be noted of this case on all
settlements negotiated before employment terminates.
Care needed when assessing compensation
Olakotan v Dr Iqbal, unreported, June 2001, EAT
Olakotan, a practice nurse, began a university course for which she had
needed Iqbal’s permission. She misled him as to her eligibility for the course
and the likelihood of funding, and when it became clear Olakotan was ineligible
she was asked to leave the course. Iqbal discovered the deception and dismissed
Olakotan successfully claimed unfair dismissal because Iqbal had not
followed a fair procedure. But the tribunal found evidence of a history of
misconduct and that the deception was "the last straw".
The tribunal held that a fair procedure would have made no difference to the
decision to dismiss and awarded Olakotan two weeks’ pay – £970 – which was the
time it would have taken to follow a fair procedure. It also held that Olakotan
had contributed to her dismissal to a "substantial extent".
Olakotan successfully appealed the issue of quantum. The EAT found that the
tribunal had failed to identify clearly how compensation had been assessed.
The apparent 100 per cent reduction for contributory fault was inconsistent
with the finding that Olakotan had contributed to her dismissal to a
"substantial" extent. Moreover the tribunal had failed to clarify
what specific element of misconduct had been taken into account to the
assessment of Olakotan’s contributory fault.
By Eversheds tel: 020 7919 4500