Essex County Council’s use of settlement agreements questioned

Essex County Council has, according to EADT 24, been criticized by local politicians after the number and value of settlement agreements  (formerly known as “compromise agreements”) entered into between 2010-11 and 2012-13 was released to the public.

A question was raised by the Labour opposition group leader, Julie Young, regarding the cost of the settlement agreements – which are intended to settle an existing or potential employment dispute between an employer and employee – after figures were made public due to a Freedom of Information request. According to the figures released by the Council, over £1.1 million has been spent over the 2010-13 period on settling potential or existing employment disputes in 69 cases (an average of £15,942 per agreement). The highest figure paid to a departing employee through the use of a settlement agreement during this time was over £80,000.

The nature of the use of the settlement agreements by Essex County Council has resulted in criticism from both the local Labour opposition group and from the Taxpayers Alliance (a national pressure group).

A spokesman for Essex County Council stated: “The use and terms of any compromise agreements, or settlement agreements as they are known, are considered on a case by case basis. A compromise agreement is only authorised when it can be justified as being a cost-effective way of closing down a dispute with or claim from an employee or ex-employee and minimises unnecessary expenditure or time being incurred in defending claims which would otherwise divert resources away from the council’s business of providing public services.”

Chris Hadrill, an employment solicitor at Redmans, commented on the matter: “Settlement agreements are generally a cost-effective means of settling an existing or potential employment dispute. Of course the costs of the agreements (such as legal fees and compensation paid) must be balanced by the benefit of such an agreement, but in my experience this appears to be the case. In any event, employees must take legal advice from (for example) a solicitor before they sign an agreement, so they will be well aware of the potential consequences that come with signing a settlement agreement.”