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Breach of settlement arrangement – can an employer stop the cheque?

If an employee is answerable for a breach of settlement agreement (see our write-up here For additional details), can an employer refuse to pay the agreed sum? A new situation in the Superior Court docket can help to answer the issue, and we explore it beneath.

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Once a settlement agreement continues to be agreed and signed by both of those get-togethers, This is a legally binding deal like every other. For instance, In case the employer fails to pay for the settlement sum, the employee has a courtroom claim for breach of agreement. If the worker that has triggered a breach of settlement settlement need to bring a claim to your courtroom/tribunal, the employer is entitled to raise the breach of settlement agreement for a defence to your declare.

The standard cure for any insignificant breach of agreement is with the wronged get together to pay for the damages for almost any loss endured. Major breaches of contract entitle the wronged celebration to tear up the agreement. The situation is that by this time, the employee’s time limit to provide a declare could have expired, which happens to be catastrophic with the claim. Settlement agreements typically have a clause indicating which the employer is just not required to pay the sum of money if the worker is in breach from the arrangement (by way of example, by breaching the confidentiality clause or ‘gagging clause’).

The Superior Court docket explored how these policies match together within a new situation identified as Duchy Farm Kennels Ltd v William Steels. In such cases, Mr Steels introduced tribunal statements in opposition to his employer and settled them as a result of Acas for more than £15k. As is conventional, the agreement involved a confidentiality clause during the boilerplate (that’s, as one particular of numerous typical clauses inside the template). A lot more unusually, The cash might be compensated in instalments around another yr.

Just after having to pay instalments amounting to some £3,000, the employer discovered that Mr Steels had advised a former colleague about the settlement, which breached the confidentiality clause. They discontinued the instalments.

Mr Steels issued a County Court assert for the rest of the settlement sum, which the employer defended on the basis that breaching the confidentiality clause was a serious breach of contract entitling it to tear up the arrangement. In legal terms this known as ‘repudiating the contract’. The County Court judge observed that telling the former personnel had not harmed the company commercially, so it wasn’t severe more than enough to permit him to repudiate. The employer appealed to your Large Court docket.

The High Court determined that For the 우머나이저 reason that arrangement didn’t expressly state irrespective of whether it was a ‘affliction’ (a clause so critical that any breach entitles the wronged bash to tear up the arrangement) and For the reason that breach didn’t bring about any reduction, like commercial humiliation, the worker received his declare for the rest of the £15k.


A confidentiality clause in a very confidentiality agreement like a non-disclosure arrangement will usually sum into a ‘condition’. But realistically, a confidentiality clause that’s from the boilerplate clauses of another arrangement is rarely planning to amount to the ‘situation’.

So if an employer will be to correctly withhold income from an employee for breach of settlement settlement by say, posting with regards to the settlement on Facebook, it will not triumph unless it has endured serious humiliation or a price to type out in the employer’s enterprise. By way of example, a slew of claims from staff, or grievances, industrial unrest, a dropped deal or detrimental media protection. If your employer has by now paid out The cash owing beneath the settlement settlement, it would sue the worker for its return.

We have in actual fact handled numerous circumstances of companies refusing to pay for out as a result of breach of settlement agreement in recent years, so this is something which does occur from time to time.

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