Re: Spring 2013 - Page 72

Can it pay to get sacked? The private legal deals behind big payouts How to offer a compromise agreement Huge payoffs often grab headlines, but the latest crop of six figure payments to high profile individuals on leaving their employment has spurred extra controversy by going to people who appeared to have done a bad job. The actual figures are hard to pinpoint, no doubt due to the confidentiality clauses that play a fundamental part in most exit agreements, however it was, for example, reported that Rebekah Brooks received £10.8 million on leaving News International, despite her alleged role in phone hacking and the demise of The News of the World last July. Four months later BBC Director General George Entwistle got £450,000 after just 54 days in the job when he resigned over the Jimmy Saville scandal; prompting Margaret Hodge MP to accuse the BBC of “rewarding failure”. The question of whether questionable performance pays frequently revolves around how much of a threat a person poses to their former bosses upon their (usually swift) departure. Compensatory payments are often used as a sweetener to persuade employees to enter a compromise agreement. These legally binding contracts are a way for the employer to protect themselves from having legal action taken against them by former employees. The outgoing person commonly agrees to give up considerable legal rights in return for a lump sum. Other benefits like a good reference, company car, or intellectual property rights may also be involved. Employers will often consider offering compromise agreements to gain security that they will not be forced into the costs and efforts of defending a tribunal case where an employee has departed under far from ideal circumstances. Employment legislation gives employees the right to make claims for things like unfair dismissal and discrimination, so bosses weigh up the cost of any future legal action against offering the departing employee enough money to get them to sign away their rights. Reports suggest that the BBC had a difficult time getting the balance right with George Entwistle. Entwistle’s contract of employment allowed that if he resigned (which, technically, he did), he would be entitled to six month’s salary. The amount that he was paid however, was double that, plus a year’s health insurance and extra money for PR advice. The negotiations no doubt centred around Entwistle’s contractual notice period of 12 months. If the BBC had dismissed Entwistle without good grounds (which, it appears, they did not have), not only would they have had to shell out the 12 months salary, but they might have also faced a costly Employment Tribunal claim. On the face of it, Entwistle had a decent position to negotiate from – not only had he worked for the BBC for 23 years, but he wasn’t in charge when the original Newsnight investigation into Jimmy Saville was pulled. The agreement for him to step down was largely that yet another senior head needed to roll to calm the public outcry, hence the enhanced figures. Compromise agreements can be used in many other ways and the sums involved are not always large, neither are they exclusive to executives, or those on large salaries. There are times where any employee may be asked to sign one. For example when: The cost of swiftly sacking someone without reaching a compromise agreement can be high. Sharon Shoesmith, the former Chief of Children’s Services of Haringey Council who was dismissed on television by Ed Balls without any fair process in relation to the Baby P case, was reported to be expecting an award of up to £1million from her subsequent dismissal related cases. As said, claims are not limited to high powered jobs and public scandals. A baker who worked for Sainsbury’s f