Welcome back to Case of the Week. Last week’s bumper newsletter examining NMW rates, the apprenticeship levy, ACAS tattoo guidance and modern slavery. This week’s case will be looking at settlement agreements.
We recently covered a case that said without prejudice discussions could be admitted as evidence if they are not labelled properly and this case goes further by asking:
Can the Tribunal set aside a settlement agreement and allow the Claimant to resume litigation if they did not have mental capacity at the time the agreement was reached?
Mr Lahhan, the Claimant, was employed as a teacher by Glasgow City Council, the Respondent. The Claimant brought claims of race discrimination, harassment and victimisation but subsequently informed the ET that a settlement had been reached and that he wished to withdraw the claim.
Was the Settlement Agreement set aside?
The Tribunal issued a judgment stating it had dismissed the claim at the Claimant’s request. However, the Claimant subsequently informed the ET he did not have the mental capacity to instruct his solicitor or make decisions at the time the settlement was reached and that he would like the settlement agreement to be set aside.
The Respondent believed the ET did not have jurisdiction to do this and a preliminary hearing was held to determine whether the ET had jurisdiction to set the settlement agreement aside and allow the claim to proceed. It found the ET did have jurisdiction and the Respondent appealed.
The EAT rejected the appeal. Under s.203 of the Employment Rights Act 1996 and s.144&147 of the Equality Act 2010 a settlement agreement must be valid in both form and substance if an employment tribunal is to be prevented from hearing a claim settled by it. This gave the ET authority to set one aside.
The takeaway point:
Yes, a settlement agreement can be set aside if the employee signing it does not have mental capacity. However this judgement goes further by suggesting that if the form or substance of the settlement agreement is in anyway invalid then the ET could set it aside. This serves as an ample reminder to make sure all I’s are dotted and t’s are crossed when concluding settlement agreements.