Tesco clawback

Tesco clawback

The news that Tesco has announced that it may pursue the former Chief Executive, Philip Clark for repayment of his £1.2m termination settlement will no doubt cause concern for those who have left their employment under a settlement agreement and received a lump sum in what they thought was a “full and final settlement”.

Tesco has said that it will pursue the recovery of his pay off if new evidence reveals that there was gross misconduct during his leadership of the supermarket chain. Its annual report confirms that it has “explicitly reserved the company’s rights to pursue recovery of these payments” should new information arise that shows gross misconduct occurring “on his watch”.

Mr Clark’s three year tenure as Chief Executive of Britain’s biggest supermarket ended in tatters in July 2014 following a stark profits warning and two months later Tesco revealed a major accounting error which revealed the profits for the previous six months had been overstated by £250m. This has led to an investigation by the Serious Fraud Office.

Many employees who leave their employment do so under what is known as a “Settlement Agreement” which is a legal document recording the terms of settlement and more often than not, there is a cash sum payment expressed to be in full and final settlement of any claims. However, such agreements will normally contain a specific provision or clause which requires the departing employee to confirm or warrant that there are no circumstances of which he or she is aware which would amount to a breach of contract and which would entitle or would have entitled the employer to terminate the employment without notice or payment in lieu. In other words, the employee is confirming at the time of signing the agreement that there are “no skeletons in the cupboard”.

It is no doubt this type of clause upon which Tesco will now seek to rely if it pursues Mr Clark for recovery of his termination payment.

Therefore, when negotiating such settlements, employees need to be aware that there should be full and frank disclosure of all matters which may cause the employer to stop and reconsider the amount of any payment being offered.

We can offer advice and assistance on this and all employment law matters and regularly deal with settlement agreements. Please speak to the employment law team on 0113 320 5000 or email employment@winstonsolicitors.co.uk