Stop Press: Important News on Compromise Agreements

Article

25 June, 2010

The Court of Appeal yesterday handed down their decision in the case of Gibb -v-Maidstone & Tunbridge Wells NHS Trust.

Ms Gibb was the Chief Executive of Maidstone & Tunbridge Wells NHS Trust. An investigation into the trust by the Healthcare Commission was carried out following an outbreak of the 'super-bug' C.difficile in which the Trust was criticised heavily in relation to the hygiene standards at the trust hospitals. The criticism also extended to the chief executive. The Healthcare Commision considered its findings to be "extremely serious" and that there had been "a significant failing…to protect the interest of patients."

As is common in many such situations, Ms Gibbs 'fell on her sword', agreeing to exit her employment by means of Compromise Agreement. A Compromise Agreement is one of the only ways in which an employee can legally sign away their rights to bring a claim against their employer. She agreed to accept a sum of £250,000.00. Ms Gibb's salary was £150,000.00 and her contract provided for six months notice of termination.

Subsequently, the Trust was audited and the payment was challenged, and withheld, on the basis that it was overly excessive. The legal argument used was that the sum being paid was "ultra-vires"; i.e. it was over and above the authority that the Trust had as a public sector body to pay someone under a Compromise Agreement. In the High Court last year, Judge Treacy agreed with this argument and struck down the Compromise Agreement on the basis that it was "ultra-vires".

The Court of Appeal yesterday disagreed with this decision; deciding that the payment was not over-generous and that the Trust was entitled to take into account Ms Gibb's good service and potential difficulties in securing future employment.

The news will be welcome for those involved in dealing with all termination packages within the public sector; but still serves as a warning to consider any negotiated settlement very carefully in light of the relevant circumstances.

For assistance in dealing with this or any other Employment Law matter, contact Jonathan Holden by email or call our Employment Solicitors on freephone 0800 689 0831.

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