Settlement agreements (formerly compromise agreements) are legally binding contracts between an employer and an employee generally (but not always) signed where the employment relationship has come to an end to prevent legal claims being raised against the employer. Claims against the employer, however, cannot always be prevented.
Charles Green, whose turbulent employment with Rangers FC came to a very public end entered into a settlement agreement the terms of which have recently been discussed in the Court of Session in the case of Charles Green v Rangers International Football Club plc.
Mr Green’s settlement agreement contained a clause that Rangers FC “will pay any reasonable professional (including without limitation, legal and accounting) costs and expenses properly incurred by the Employee after the date of this Agreement which arise from having to defend, or appear in, any administrative, regulatory, judicial or quasi-judicial proceedings by a third party as a result of his having been Chief Executive of The Rangers Football Club or the Company”.
Two issues arose with this – firstly, who were the employers? It has been well publicised that following liquidation, Rangers FC were resurrected as “The Rangers Football Club Limited (newco)” and not “The Rangers Football Club”. The agreement was ambiguous in this regard. The Court found, after much consideration, that “The Rangers Football Club” was an association separate from the person or persons owing the club at any time and that the clause in the settlement agreement was a reference to Mr Green’s employment with “The Rangers Football Club”.
The second issue was whether, on that basis, Rangers FC should be liable for the legal fees of Mr Green in relation to certain criminal offences committed during his tenure. He sought to argue that the clause in his settlement agreement meant that Rangers FC should cover his legal fees in this regard. His claim was unsuccessful with the Court of Session finding that Mr Green’s acts were “not within the legitimate pursuit of (his) activities as CEO” and that alleged criminal acts would not fall under the terms of the agreement which covered judicial fees “arising from his involvement with Rangers”.
This case highlights the importance of having well drafted, carefully worded settlement agreements in place and that any ambiguity in the drafting can be very costly. If you are an employer who requires advice in relation to settlement agreements, or are an employee who has been offered a settlement agreement to sign or are looking for advice on a settlement agreement, contact us today to arrange an initial free consultation.
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