Can victims of sexual harassment challenge the validity of their settlement agreements/NDAs?

In the wake of recent probing by investigative journalists, a number of women have come forward to report sexual assault at the hands of Mohammed Al Fayed, and have raised the possibility of bringing claims against Harrods itself.  Unusually, a spokesperson for Harrods has publicly announced that no rights it has against victims contained in historic settlement agreements will be enforced.  Whether this is a reference to the non-disclosure clauses in the settlement agreements or the waiver clauses is not 100% clear. However, this approach is exceptionally rare, and for those who have previously brought and settled claims in exchange for a settlement agreement, having that agreement set aside so that a claim can be brought is highly problematic.  

So, what, if anything can be done if a settlement agreement has been signed but the alleged victim want to reignite a legal process against one of the parties to the agreement? 

Settlement Agreements

Settlement Agreements are legally binding contracts, so a party who breaches a term of the contract will leave themselves open to an application by the other party to enforce the contract, and/or seek damages by bringing a breach of contract claim. It is not unusual for settlement agreements to stipulate that any payments (e.g. compensation payments) that have been made under the agreement to Party A, must be paid back by Party A should a breach of a material clause in the settlement agreement occur. 

Parties may be able to re-negotiate the terms of a Settlement Agreement, after signature, but it is unlikely that the former employee or alleged victim of the harassment will have sufficient leverage to make this a compelling option for the employer. Unless perhaps there is in existence a very public scandal such as the one that Harrods are now seeking to minimise. 

If the terms of the settlement agreement cannot be re-negotiated, the only way for a party to be released of its terms is to challenge the validity of the agreement: 

Failure to satisfy the statutory requirements of section 203(3) Employment Rights Act 1996 

For a settlement agreement to be valid with workplace disputes, certain conditions must have been met at the time of signing the agreement: 

• The agreement must be in writing 
• The agreement must refer to a “particular complaint” or “particular proceedings”
• The employee/worker must have received legal advice from a relevant independent adviser (as specifically defined) on the terms and effect of the proposed agreement and its effect on the employee’s/worker’s ability to pursue any rights before an employment tribunal.
• The independent adviser must have a current contract of insurance.
• The agreement must identify the adviser. 
• The agreement must state that the conditions regulating settlement agreements have been satisfied. 

If an agreement fails to comply with any of these requirements, it will be invalid and unenforceable. This will be particularly important to anyone who has signed a settlement agreement without independent legal advice. Where there is evidence of a specific connection between the employer and the adviser signing the agreement on behalf of the alleged victim, enquiries should be made into whether the adviser could be said to be truly independent.

Common Law Challenges 

If a settlement agreement complies with all of the statutory requirements, it may nonetheless be capable of being held to be invalid by a court or tribunal, though it is notable that  such challenges are rare. The four key areas where challenges may be possible are: 

• Capacity to contract: If a signatory lacks capacity (e.g. they are a child or have a mental health condition that renders them unable to consent or otherwise very vulnerable), the settlement agreement may be set aside. 

• Fraud/ Misrepresentation: Settlement agreements can be rescinded on the basis of fraud. This is so even if there is some knowledge that the claim is fraudulent before entering into the agreement and the fraud only became clear after the conclusion of the agreement. Individuals should, however, be wary of any potential challenge based on misrepresentation following the judgment in the case of Crystal Palace FC (2000) Ltd v Dowie [2007] EWHC 1392 (QB), in which the High Court declined to order the rescission of a settlement agreement as a remedy because it would have revived the contract of employment. Reviving the contract of employment meant there would be an adverse impact on third parties, namely the employee’s successor and his new employer. 

• Illegality: If the settlement agreement is illegal in law, it or a specific clause, can be rendered unenforceable (for example, a settlement agreement cannot seek to prevent a report of criminal behaviour being made to the police, or, arguably, a report to a regulator). It is important to note that one such error in the settlement agreement will not necessarily mean the whole agreement gets set aside. What will be critical is whether the clauses dealing with waiver of claims are set aside – as these are the clauses which seeks to prevent a victim resurrecting their claims.

• Duress/ Undue Influence: If it can be shown that a settlement agreement was entered into because of duress or undue influence, it may be set aside, and this will generally mean in its entirety. Note that evidence of this can be difficult to ascertain. Where it is alleged that there were threats, any such comments are only likely to be regarded as significant should they constitute actual threats rather than being a mere suggestion of ‘what might happen’ if a person pursues a claim. In the case of Holyoake v Candy [2017] EWHC 3397 (Ch), it was alleged that Mr Holyoake was told that if he did not sign a supplemental agreement rescheduling a loan, CPC would create a situation that would be extremely stressful for Mr Holyoake and his wife, saying “you need to think of your pregnant wife” and that he would “feel terrible if anything were to go wrong during the pregnancy for her or the baby”. This, however, was held not to be sufficient for Mr Holyoake to have the agreement set aside due to duress. Undue influence between two parties to an agreement may occur where one party has an extreme ‘hold’ over another person, which can occur in certain cases involving sexual abuse. Where the party wanting to set aside the agreement had full use of independent legal advice when they signed it, it will be difficult to set it aside on the basis of undue influence. Nonetheless there have been arguments deployed in the recent past that the independent adviser was “outgunned” by the employer’s lawyers and negotiations were extremely stressful and ran into the early hours. Without more, however, it will only be in exceptional cases that such arguments succeed.

Given the very limited options available to an individual once a settlement agreement has been signed, and the potentially dire consequences should they breach the agreement, e.g. by talking to a journalist or trying to launch a further legal claim, they should take no steps without first  obtaining independent advice from a specialist lawyer. 

Farore Law is a leading boutique law firm that has a wealth of experience in advising individuals who have experienced sexual harassment. We are well placed to provide appropriate advice regarding claims involving sexual harassment and settlement agreements. Our lawyers frequently advise senior executives and recognise the importance of anonymity and reputation management.

Please contact us if you require legal advice regarding sexual harassment.