Throughout our story, we will be following a local restaurant called The Sumptuous Pizzeria (TSP). TSP is a small, local, family run Pizzeria which offers both a sit-in dining experience, take-away and delivery.
In our previous edition, TSP sought to make a number of redundancies but didn’t quite get everything right. This has led to Adam, one of the three serving staff and Lewis, the driver, making allegations that they had been unfairly dismissed.
Shortly after making both Adam and Lewis redundant, Anthony (TSP’s Finance Manager and quasi-HR) received three letters. The first letter came in two parts. The first was an open letter from Sue, representing Lewis in relation to claims for unfair dismissal and disability discrimination.
Sue alleged that in failing to go through the entire redundancy consultation process, Anthony had:-
failed to unearth that Lewis was suffering from depression which was believed to be a disability for the purposes of the Equality Act 2010 and that Sue suspected that Anthony had taken this into consideration when selecting only Lewis to be placed at risk of redundancy; and
unfairly dismissed Lewis by failing to demonstrate a diminished requirement of his work and/or gone through a fair process, citing failure to consider the other drives to be placed within the pool and/or going through the full process.
The second letter, also from Sue was marked “without prejudice and subject to contract” and made an offer that Lewis would not pursue his claims in exchange for a settlement agreement and what Anthony considered to be an eye watering sum of compensation.
After taking legal advice, Anthony was informed that TSP was at risk of these claims succeeding and, if there was a well-founded claim for discrimination, Lewis could bring this against Anthony personally.
Anthony instructed TSP’s lawyers to revert to Sue and inform them that, whilst they appreciated the situation, they simply could not afford to offer the sums sought. TSP’s finances were stabilising after the reduction of staff but ultimately it would be a rocky few months ahead.
A deal was struck on the basis of a reduced settlement offer, compensating Lewis for a couple of month’s losses and injury to feelings and an apology from Anthony regarding the manner in which he had conducted the redundancy process. This was all wrapped up in a settlement agreement, duly executed by both parties and a small sum paid to Lewis’ solicitor, Sue for the legal expenses.
The third letter was a handwritten note from Adam, one of the three serving staff who had been made redundant. In his letter, Adam said he was very upset and felt that he had been unfairly dismissed.
Still scorned from his experience with Lewis, Anthony called Adam in for a ‘little chat’. When Adam arrived, Anthony explained to him the redundancy process that had been followed and the scoring matrix that had been used to select Adam for redundancy.
Adam argued that he had not been in receipt of the scoring matrix and asked why he had not been considered for the vacant host role.
Fearful that Adam may also go legal, Anthony offered a settlement of three months’ salary under a ‘gentleman’s agreement’. He said that if they could not come to an agreement then Anthony would have to consider whether there was any elements of the previous payment that could be recouped, in the event of any outstanding disciplinary matters. Adam stated that there were no such outstanding issues but was willing to take the offer. The pair shook hands and Adam left.
Whilst Anthony had been displeased with having to pay a further three months to Adam, he figured that it was cheaper than having him go to some lawyers which would result in more money having another settlement agreement.
Looking at Lewis’ situation first, we consider that his lawyer, Sue, did a good job of picking up the potential disability discrimination aspect. Such claims are not easy as one might imagine in light of the lack of ‘hard evidence’ since no-one says “we are letting you go because your disability”.
We are in agreement that Anthony possibly could have picked up on Lewis’ disability, had he gone further with the redundancy consultations. Additionally, there is the possibility that Anthony should have allowed for reasonable adjustments to the redundancy process, in light of the disability but this part is missed which probably reduced the overall figure in the settlement.
Overall, we consider that Anthony made a pragmatic decision to resolve the dispute at an early stage, rather than allow it to run on and incur costs for both TSP and himself. It is likely that a claim against both parties could potentially result in double the legal fees as lawyers for TSP may wish to consider the ‘reasonable step’s defence and therefore a conflict of interests may arise.
Ultimately, Lewis had to make the same decision. Whilst he may have had several claims, he had to balance this against pursuing a lengthy and potentially costly tribunal process and so a swift resolution for both parties was preferential. Additionally, if TSP had fixed a figure for the legal fee contribution and Lewis had incurred fees in excess of this, he would have had to pick up these additional fees himself.
Turning to Adam, Anthony again makes a beneficial judgment call in resolving the matter promptly and avoided the question marks over whether Adam should have been considered for the host role. However, in trying to ‘cut corners’ or at least cut down the costs that he may have to pay for legal expenses, Anthony has left TSP at risk. Without a formal settlement agreement, there is no guarantee that Adam would not lodging a claim against TSP and Anthony would not be able to use the conversation that he held with Adam to stop him from pursuing the claim as the settlement had not been correctly inserted into a settlement agreement.
The above situation is not uncommon and ultimately is a question of risk management for your business. If you trust that the employee will not pursue a claim against you then such conversations/payments may be worthwhile but if you are looking for a belt and braces approach, we would suggest a settlement agreement.