We all know that some things just don’t work out. Employment relationships are no different.
So, what happens then? Sometimes, there needs to be an agreed exit.
For charities facing such an issue, particularly with a senior employee such as a chief executive, there is a delicate balancing act between the commercial reality and legal risks of the situation, stewardship of precious donated funds, and the oversight of the regulator.
The Charity Commission recently warned that one national charity, the RSPCA, had, in their opinion, got this balancing act badly wrong.
The Charity Commission started an inquiry after The Times reported that former acting chief executive, Michael Ward, was paid a sum of more than his £150,000 salary when he departed the charity. It said Mr Ward, 57, received the pay-off in May this year after he claimed he did not get the permanent position of chief executive due to his age.
On 22 August, the Charity Commission issued an official warning to the RSPCA saying they considered trustees had “committed a breach of trust or duty or misconduct or mismanagement in the administration of the charity in relation to:
- A failure by the officers to comply with their duty to ensure they were sufficiently informed before making a decision about the settlement to the former Acting Chief Executive;
- Failure to act with reasonable care and skill in relation to the negotiation with the former Acting Chief Executive”
As well as the bad press coverage and reputational damage, the charity was ordered to implement the recommendations of an independent governance review.
As a general point, charities should ensure that trustees are provided with appropriate training so they are fully aware of their responsibilities as trustees.
Our five top tips
- Take professional advice at an early stage. Correspondence about a case with a law firm attracts the protection of legal privilege that cannot be offered by other advisers, such as HR consultants. We have seen many a case unravel where such correspondence has to be disclosed.
- Disclose all the facts to your lawyer in order to receive advice on your negotiating position that is fully informed, before any settlement offer is made. For example, if the senior employee is claiming (potentially uncapped) compensation for alleged discrimination, ask your expert employment lawyer to scrutinise the evidence, to assess the realistic strength or weakness of that claim. That assessment can make a huge difference to any offer.
- From this, you can enter into negotiation with a clear understanding of what will be your first offer, as well as your ‘upper threshold’ or final offer.
- Take care to ensure that all negotiations are ‘Without Prejudice’. ‘Without Prejudice’ is a common law principle, i.e. derived from case law. In the workplace, employers are permitted to have ‘off the record’ discussions with their employees about the proposed termination of their employment, without those discussions being admissible in legal proceedings whether before a court or tribunal. Consider also whether you can get the protection of a section 111A offer – discuss this with your lawyer.
- Take advice at an early stage about the taxation of any elements of a settlement package, which can be complex for a senior executive. It can happen – after weeks of wrangling over the commercial terms of a departure package, everything is committed to paper and suddenly it becomes apparent that the negotiating parties’ understanding of how various termination payments will be taxed is rather different, which can bring the prospect of agreement to a shuddering halt. This can be a complex area and we would always advise that professional legal and financial advice is taken.
Our employment solicitors work in partnership with charities to improve their HR practices and advise on employment issues, including senior exits and settlement agreement negotiations. To discuss this article or any other HR issue call 01872 265100 or firstname.lastname@example.org