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HR buddies

The Covent Garden HR Buddies is an initiative facilitated by Clarkslegal to offer the London HR community the opportunity to meet with like-minded peers, attend relevant seminars and workshops and boost your knowhow of the issues specific to this sector.
 
It’s free and open to anyone interested in HR. It sets its own agenda, so it can be purely social or facilitate presentations to help prevent HR problems for companies in the London area. So if you want to network face to face contact buddy@clarkslegal.com. Click here for further details about our next HR Buddies event.  

If, alternatively, you wish to network online with other HR professionals, then using the discussion forum below, is your ideal opportunity to do so.

Please feel free to post new queries or questions, and/or reply to ones already posted. All you have to do is register a few details, then you will be ready to post your thoughts.

You can post a new query by selecting the tab "new thread". To reply to a post, select that post and then choose the "reply" tab.
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 Drafting compromise agreements
 
Kate_Atkinson
99 posts
Joined
1/4/2006
Drafting compromise agreements
Posted: 10 May 06 9:30 AM

Buddy was asked this week: When we draft compromise agreements, we stipulate that any breach by the (ex)employee will result in repayment of the monies paid. Is it right that such a clause is not enforceable?
Kate_Atkinson
99 posts
Joined
1/4/2006
Re: Drafting compromise agreements
Posted: 02 Jun 06 11:03 AM
Buddy says:It depends on the wording of the clause whether it will be enforceable.  The Court of Appeal has recently determined (CMC Group Plc v Zhang) that a clause in a commercial agreement settling a claim that required the entire settlement sum to be repaid in the event of any breach of the agreement was a penalty clause and thereby unenforceable.  If the clause you use in your compromise agreements results in repayment of the entire payment for any breach (even minor breaches) it is likely to be a penalty clause.
 
Employer information:Widely drafted repayment clauses are unenforceable.  In the Zhang case, the entire $40,000 was repayable for any breach.  In this case the breach would have resulted in minimal loss to the Company, was excessive and therefore a penalty.
 
Employers should consider the following when inserting repayment clauses in compromise agreements:
  • Where the sum specified as repayable is extravagant or unconscionable compared to the greatest loss as a result of the breach, it is likely to be a penalty clause
  • If the breach consists of not paying a sum of money and the sum stipulated to be repaid is greater than the sum to be paid, it is likely to be a penalty clause
  • If a single lump sum is repayable on the occurrence of one or more different breaches, some serious and some not, it is likely to be a breach
  • Ideally separate amounts should be identified for individual breaches
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