I signed a settlement agreement during a period of mental illness. Where do I stand?

Mental health issues are a growing concern across the UK and world. It is estimated that 1 in 6 people in the past week experienced a common mental health problem. According to the Health and Safety Executive 23 days are lost due to stress and mental health problems each year.

Stress and Work

Stress, anxiety, depression or another diagnosed mental illness can result due to work issues or outside work. When an employee suffers from mental ill-health it may result in sickness absence or lower performance, resulting in an employer taking (or contemplating) action against the employee. Ultimately, an employer may decide to end employment.

Mental Health and Disability Discrimination

Under the Equality Act 2010 mental illness can amount to a disability if it has a more than trivial disadvantageous impact on an employee’s ability to perform normal day-to-day activities. An employer that knows of the disability and the disadvantage it causes, or ought reasonably to have known, will discriminate against a disabled employee if it fails to make reasonable adjustments to remove the disadvantage (or return the employee to work if he/she is absent because of disability related illness).

If you feel you have suffered disability discrimination you should seek legal advice as soon as possible, as there are strict time-limits for bringing claims in the employment tribunal.

Settlement Agreements

Sometimes an employer may prefer to offer an employee a settlement agreement rather than terminate an employee’s employment or go through a performance / capability procedure. The advantage of a settlement agreement for an employer is that it avoids the risk of claims and resolves the situation more quickly.

An employee might also be attracted by a settlement agreement. It may result in a compensation / termination payment that enables the employee to take some time-off work and focus on getting better. An employee must have advice on a settlement agreement and can therefore discuss the pros and cons of any offer.

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Mental Capacity and Settlement Agreements

The recent Employment Tribunal case of Glasgow City Council v Dahhan dealt with the issue of mental capacity and settlement agreements.

The EAT decided the tribunal did have the power to set aside a settlement agreement signed by an employee on the grounds that the employee did not have mental capacity.

Facts of the case

Mr Dahhan had signed a settlement agreement, waiving claims against his employer, including claims of discrimination under the Equality Act. He had been advised by a relevant adviser at the time. He brought a claim in the tribunal which the Respondent argued had been settled by the settlement agreement meaning the tribunal could not consider the claim; it did not have jurisdiction.

Employment Appeal Tribunal Judgement

The Employment Appeal Tribunal cited Industrious Ltd v Horizon Recruitment Ltd (in liquidation) and Vincent [2010] IRL 204 EAT.

The Tribunal has power, in certain circumstances, to set aside an agreement where there is an absence of consent of a party, because of misrepresentation, economic duress or mistake.

The EAT’s decision is that the tribunal does have the power to decide there was no valid agreement due to an employee’s lack of mental capacity.

Paragraph 21 of the Judgement:

” It may be that the Employment Judge in this case misunderstood the position to some extent when she suggested that the power of the Tribunal to set aside the contract somehow emanated from the common law. The power, indeed the obligation, to consider the validity or otherwise of a qualifying settlement agreement emanates from the statute itself.  It seems to me that that was the general principle articulated by Silber J in Industrious Ltd v Horizon Recruitment Ltd.  Where a claim is made that one party to an otherwise ex facie valid agreement had no capacity to contract, the duty of the Employment Tribunal to examine that issue and refuse to acknowledge as enforceable the agreement, if on the evidence led a lack of capacity is proved, is all part of the exercise laid down first in the 1996 Act and now in the 2010 Act.”

For free advice call 0800 063 99 00. Speak to a specialist employment lawyer.

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