Employment Rights Update – January 2016

In the first update of 2016 we consider cases on penalty clauses in Settlement Agreements and taxation of injury to feelings awards.

Cavendish & Beavis – Supreme Court

In these appeals the Supreme Court (SC) has reviewed the law in relation to penalty clauses.
 
Beavis hit the national press because it concerned an “extortionate” parking ticket (the sort of thing used to deter parking on private land) but the principles in these two cases are of more general application than those circumstances might suggest.

We typically see arguments about “penalties” in Settlement Agreements (SAs) where e.g. the employee warrants that s/he will keep the settlement confidential.

Often the SA will go on to provide that, if the employee fails to comply with the warranty (i.e. goes public with the details), s/he will have to repay the whole amount payable under the SA.  This wholly disproportionate consequence of default is known in law as a “penalty clause” – and the usual rule is that it will be unenforceable.

View the full employment rights legal update.