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Blog: Sometimes it helps when your owner is a billionaire

I should start by declaring an interest.  I am not a Chelsea fan.  However, I will do my best to be as dispassionate as possible in this blog as I consider the settlement for Chelsea’s ex-club doctor, Eva Carneiro, in her Employment Tribunal sex discrimination claims against them.

The incident

As you may well have heard, the case arose out of an incident on the opening  day of the 2015/16 football season. Dr Carneiro went on to the pitch to treat Chelsea player Eden Hazard. She claimed that Mr Mourinho shouted the Portuguese phrase “filha da puta” at her, which means “daughter of a whore”, as she ran on to the pitch.  Because she was treating him, Hazard had to leave the pitch. This left Chelsea with only nine men on the pitch. Following the game Mourinho publicly criticised both Dr Carneiro and first team physio Jon Fearn for being “impulsive and naive”.

Dr Carneiro resigned about a month later, after being demoted.  I’m sure many of you spotted at the time that the demotion seemed particularly unwise and likely to cause the club to end up being sued.   The chance of Dr Carneiro’s contract of employment allowing the club to forcibly demote her seems slim.

Dr Carneiro brought claims of constructive dismissal and sex discrimination.

The deal

A few days prior to the hearing it emerged that Chelsea had made an offer to her of £1.2 million to settle the case.  Dr Carneiro rejected that sum and then, on the morning of the first day of the hearing, the case settled for an undisclosed sum in a confidential deal.

It is unlikely that we will ever know the terms of the settlement agreement but it is highly likely that there will be two things in the document:

  1. The settlement figure will be higher than the previous offer. I have seen some speculation in the media that the figure was £5 million. I imagine that was a pure guess (see below); and
  2. There will be a carefully drafted confidentiality clause, with no doubt a repayment provision if Dr Caneiro, or any of the limited pool of people with whom she is allowed to discuss the agreement, were to disclose any of the details of the settlement.
The interesting bits

There are a couple of points of interest in this case for lawyers and hard-working HR people.

The first is that the terms of the initial settlement offer were made public. Normally all such negotiations and offers are made on a confidential ‘without prejudice’ basis, which means that they cannot be disclosed, and I’m sure you were as surprised as I was to hear it being discussed in the media. It appears in this case that it was Chelsea who deliberately disclosed the offer. This will have been done to put pressure on Dr Caneiro to settle her case.

This sort of open offer is usually made with the intention that, if the claimant rejects it and fights the case and either loses or gets awarded less than the amount of the open offer, the respondent can then raise the argument that the claimant acted unreasonably in rejecting the offer and should therefore be ordered to pay the respondent’s legal costs from the point the offer was made up, to and including the hearing.  ‘Unreasonable behaviour’ during the course of bringing a claim is one of the rare occasions that a party to an Employment Tribunal claim can be ordered to pay any of the respondent’s costs.

As Chelsea’s solicitors (who would no doubt have been a lot more expensive, but of course no better(!) than Menzies Law) had instructed a QC and no doubt a more junior barrister then it is a safe bet that their legal costs would be in the hundreds of thousands of pounds.

These sort of open offers can be very helpful in bringing about a settlement but they need to be used with great caution by employers. This is because some Employment Judges can regard them as a bullying tactic, brought by employers with deep pockets, to pressurise Claimants into settling their case.  Also, while they are well established in the civil (mainstream) courts, there is not currently a rule that requires an Employment Tribunal to order a claimant in this situation to pay the respondent’s costs if she rejects a decent offer.  It is simply something that can be asked for, at the judge’s discretion.

The other point of interest is why Chelsea would want to make such a significant offer.  If we drill down into the figures, we know that the maximum injury to feelings award is £30,000. Therefore, even based on the settlement offer (i.e. the one we know about, which is probably lower than the subsequent offer) the compensatory element of that figure represents over 4 years’ salary (according to reports in the media Dr Caneiro earned £280,000 per annum).  It is not impossible, although possibly unlikely, that a Tribunal could award that.  However I suggest that the offer was not driven by Chelsea’s worst case scenario in terms of Tribunal award.

It was probably motivated more by Chelsea and Jose Mourinho (who is just starting his new managerial role at Manchester United) wanting to avoid embarrassment and potential damage to their reputations.

Jose Mourinho was due to give two days of evidence and faced a considerable amount of statements and documents,  including texts and emails, being made public.  It is telling that the settlement came about on a day that he attended the Tribunal in person, albeit on a day that he was not expected to give evidence.

Worst case scenario

We are often asked by clients who are facing a Tribunal claim, or even considering the consequences of dismissing an employee, about what the worst case scenario is for them. It is possible to give a rough estimate on the potential award that an employee could get if the claim succeeds in the hearing.  However, there are often other factors that can be more important in determining the true “cost” of a claim.  Those other elements include the legal costs and the opportunity cost of the management time that will be used in dealing with the claim.

Typically the Claimant’s colleagues and managers involved in the matter and one or more members of the HR team will be spending time on the case; plus there is also likely to be one or more Directors with, at least, a passing interest in the case. Those opportunity costs will often dwarf the legal costs, the big difference of course being that many companies will not be putting a figure on what a day’s time for a HR manager or Director costs the company.

Next comes the potential external cost:  this is the damage to reputation with colleagues, potential employees, customers, potential customers and so on. In the brave new world of social media, this is an aspect that is not to be ignored or belittled.   The risk of damage to reputation is difficult to quantify but there are a few factors that are fairly well established. The identity of the company or employee involved can lead to heightened media interest. A household name will guarantee media interest in the case.

The nature of the claim is also going to have an impact. A claim about a technical error in a redundancy exercise will only be of interest to employment law anoraks (of which I am proud to be one) whereas a discrimination claim will usually generate more interest.  If you combine a household name with a discrimination claim you can virtually guarantee it is standing room only in the public area at the back of the Tribunal hearing room.  When a company considers that scenario it is often largely irrelevant whether their lawyers tell them they have a strong case or not. They simply will not want the publicity and it can be worth a considerable amount of money to settle the case before too many headline grabbing details emerge.

We are certainly not encouraging you to settle Tribunal claims that you may face but, just as Chelsea have clearly done, there is more than just the potential award to consider when reflecting on the likely costs of a claim.

Simon Martin

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