Negotiating severance packages: you can’t pick and choose

The Employment Appeal Tribunal has ruled that an employer is not expected to honour the agreed parts of an employee’s severance package while the parties continue negotiating the remaining terms.

Severance negotiations 

The employee’s employment terminated by reason of redundancy. Prior to termination, the employer and employee discussed severance terms over several months. This is not unusual, as it is common for parties to discuss mutual severance terms while a formal redundancy process is ongoing.

The severance discussions dealt with the transfer of ownership of the employee’s company car, his computer and a bonus payment. The employer agreed these would be given to the employee if he worked his notice period.

The employee sought to negotiate the offer. He accepted the "gift" of the car but challenged the overall severance offer. On leaving employment, ownership of the car was not transferred to him and he brought a breach of contract claim.

Employment Appeal Tribunal rejects employee's claim

The Employment Appeal Tribunal ruled that the employee could not accept part of the severance offer (i.e. the car), while seeking to improve the other parts. It considered that negotiation of severance agreements would become too complex if a party could accept some terms while seeking to improvement on others. The offer of the car did not standalone. It was made as part of wider employment termination discussions which were not concluded. 

What does this mean?

It is important for employees negotiating a severance or an enhanced redundancy package with their employer to make sure any agreement they reach with their employer is formalised in writing and covers everything that they have agreed. This will normally be done via a settlement agreement.

A settlement agreement will also normally require the employee to give up any claims they may have against their employer. To give up statutory claims, such as unfair dismissal and discrimination, the employee must also be advised on the settlement agreement by an independent solicitor or other independent legal adviser.    

It is important that if you have been offered severance terms by your employer, you seek specialist legal advice from an employment lawyer as soon as possible.

Evergreen Timber Frames Ltd v Harrington