Shock court judgement could end NHS executive payoffs

Rose Gibb, former Chief Executive of Maidstone and Tunbridge Wells NHS Trust, has lost her High Court battle for a £175,000 severance payment.

Regardless of whether or not the Trust board were right dismiss Ms Gibb (and Dr Crippen has a different view from most of the media) or right to give her £175,000 to go quietly, the case raises a number of interesting issues.

Compromise agreements, like the one negotiated with Ms Gibb, are effectively where an employee agrees to resign, or is dismissed and waives her right to claim unfair dismissal, in return for a large amount of money. This saves the employer from having to go through the messy and often lengthy process of sacking someone. Usually, the amount offered is enough to make it not worthwhile for the employee to bring a legal case.

They have been used for years in both private and public sectors, most often for senior executives. Board and executive team members are rarely ever sacked in the way that most people would understand the term. The news headlines might say that an executive has been sacked but, in reality, he has usually been offered a huge amount of money to disappear.

This practice has become so common that the Trust Board at Maidstone and Tunbridge Wells probably didn’t think there was anything unusual in giving Rose Gibb her £75,000 contractual notice plus another £175,000 to go without a fuss. The trouble only started when the health secretary Alan Johnson intervened to stop the payment.

Now, given that both sides had signed a legally binding agreement, this looked like breach of contract which is why most people, including me, expected Ms Gibb to win her case. But the judge ruled that the agreement was legally void because the Trust Board did not have the authority to make a payment of that size.

By extension, the logical implication of this judgement is that no NHS trust has the authority to make payments of that size. So where does that leave them?

As the Health Service Journal commented, this judgement ends the era of payoffs. Well, in the NHS, at least.  No senior NHS executive will be prepared to sign a compromise agreement now, unless it has been signed off by the Secretary of State. This effectively means that to remove poorly performing executives will require NHS trusts to go through a performance management and disciplinary process, like they would for other staff. In an ideal world, this would mean that more incompetent NHS executives would be sacked. What it will most probably mean, though, is that more of them stay in post because the option of paying them to go quietly has been removed.

But this judgement also tells us something about the sovereignty of NHS trusts. If their boards don’t even have the authority to make arrangements for getting troublesome executives out of the organisation, then how much real power do they have? Has this judgement just confirmed what many of us thought all along? That Trust Boards are simply an expensive way of providing an illusion of local accountability while, in truth, the NHS remains as centrally controlled as it ever was.

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