compromise agreements and Andy Coulson

Compromise agreements made the BBC News at Ten tonight with Robert Peston’s report that Andy Coulson received “hundreds of thousands” from News International while working as press officer for Prime Minister David Cameron.

The function of a compromise agreement is to prevent an employee who might bring a claim against his or her former employer from doing so. It’s an essential element of such an agreement that the terms remain confidential between the parties. Any properly drawn compromise agreement will ensure this. The idea is that a payment is made which represents a fair settlement without the need for the issues to be played out in public tribunal proceedings. However, if those issues are not subject to judicial scrutiny and the fact of the payment is disclosed, it’s easy for people to take the view that the employer is acknowledging wrongdoing by making the payment. Often that is not the case.

Employers may take the view that a public airing of problems with a particular employee is best avoided by offering a payment which is sufficient to ensure that the employee is dissuaded from bringing a claim. This can be a purely commercial decision based on the time it will take to deal with the issues and, perhaps, the embarrassment caused by the disclosure of commercially sensitive information.

So, how does an employer guard against such problems? The first requirement is to have clauses in the agreement which prevent either party from making statements which are disparaging of the other. Second, well drawn compromise agreements will include a form of reference which the parties agree will represent the full extent of what the employer will say about the employee. Third, the agreement will include a provision that if the employee takes up alternative employment and payments are being made by instalments, those payments will either cease on the commencement of the alternative employment, or will be repayable to the extent that they duplicate payments which might be received from an alternative employer. Putting aside the political issues, it’s this last point which has been highlighted by tonight’s report.

The obvious drawback with such agreements is that the requirement to keep the terms confidential applies only to the parties. Consequently, unless he is a “servant or agent” of Mr Coulson or News International (and presumably he is not) Mr Peston is not in breach of the presumed confidentiality provisions in the agreement. As with all such confidentiality provisions, once they are are in the public domain (other than by wrongdoing by one of the parties) they are worthless. News International has pointed out that there is nothing wrong with employees receiving staged payments but, of course, the issue is of more import for Mr Coulson’s subsequent employer. The Conservative Party says that it was unaware of the payments and stated so as recently as last month:

We can give categorical assurances that he wasn’t paid by any other source. Andy Coulson’s only salary, his only form of income, came from the party during the years he worked for the party and in government.

However, it now appears that Coulson received the balance of his two years’ notice entitlement in instalments, comprising salary and other benefits including private health care and a company car.

Some have argued that the severance terms agreed with a former employer are really none of the business of the subsequent employer, particularly if they are contained within a supposedly confidential compromise agreement. However, it can’t be said that no enquiry was made, judging by the quote from a party spokesman referred to above.

There is also the interesting matter of what Andy Coulson had to say about the matter. As reported in the Guardian, the following exchange took place before the Select Committee in July 2009:

Tom Watson: Just one last round of questioning. You knew that you were going to resign before sentencing, but on the day of sentencing you resigned from the paper.

Coulson: I actually resigned two weeks before I announced it.

Tom Watson: Two weeks before. And did you get a redundancy payment for that?

Coulson: I got what was contractually due to me. Obviously I did not work my notice so I received what was contractually due.

Tom Watson: Then you were six months out of work.

Coulson: About five months.

Tom Watson: And then you went to work directly for the Conservative party.

Coulson: That is right.

Tom Watson: And you have not got any secondary income other than that have you?

Coulson: No.

Tom Watson: So your sole income was News International and then your sole income was the Conservative party?

Coulson: Yes.

Tom Watson: That is great, thank you.

Does the duty of confidentiality in a compromise agreement go so far as requiring denial of the existence of payments made?

While on the topic of News International, it’s also worth noting that the Independent has reported that Rebekah Brooks remains on the payroll of the Company notwithstanding her ostensible resignation. Having resigned from numerous directorships she has retained the use of her News International chauffeur driven car. This is thought to be part of a “severance package”, presumably contained within a compromise agreement.