Employees should take warranties seriously

Collidge v Freeport PLC [2008] EWCA Civ 485

The case of Collidge v Freeport PLC [2008] EWCA Civ 485 is a reminder that employees must take warranties in settlement agreements seriously, or their employer may be let off having to pay them the settlement payment.

Mr Collidge signed a settlement agreement agreeing to end his employment and waive all employment claims he may have had against his employer. In exchange his employer agreed to pay him a substantial settlement payment of £445,680.

The relevant sections of the settlement agreement are underlined below:

Subject to and conditional upon the terms set out below, [Freeport] will:-

a) pay to you the sum of £445,680 gross as compensation in respect of the termination of your employment;”

and

You warrant as a strict condition of this agreement that as at the date hereof…b) there are no circumstances of which you are aware or of which you ought reasonably to be aware which would constitute a repudiatory breach on your part of your contract of employment which would entitle or have entitled the company to terminate your employment without notice”.

Before his employer was due to pay Mr Collidge the settlement monies it discovered alleged serious acts of misconduct, which it said would have entitled it to summarily dismiss Collidge, had it known of them.

The day before payment of the settlement monies was due Mr Collidge was sent a letter  saying that he was in breach of warranty clause and so payment could not be authorised.

The judge found that this warranty was a condition precedent to the employer’s liability to perform its obligations under the agreement. In other words, the employer did not have to make the settlement payment if the warranty given by the employee was untruthful.

The Judgement also indicates where a settlement payment has been made and the employer  subsequently discovers the employee has concealed something that would have allowed the employer to dismiss (making the warranty given untruthful) the employer would be able to pursue the employee for repayment of the settlement monies.

Even though the employer was not required to pay the employee the settlement remained binding, meaning the employee in this case was unable to pursue employment claims as they had been settled.

NOTICE: The contents of this article are for guidance only and do not constitute legal advice (nor are they intended to constitute legal advice). 

 

 

 

 

 

 

helping employees with settlement agreements since 2013