A discount supermarket chain has agreed to pay substantial damages after sending a gay store manager home on leave because he was HIVpositive.

The German-owned chain Aldi is believed to have paid Mark Hedley, 34, of Gateshead, Tyne and Wear, as much as £250,000 after they reached a last-minute out-of-court settlement yesterday.

Mr Hedley's case for disability and sexual discrimination against Aldi, which employed him at their store in Seaham, Co Durham, had been due to begin at an employment tribunal in Newcastle upon Tyne yesterday.

Although the exact size of the compensation package has not been revealed, an employment lawyer close to the case said: "It is a very large settlement. It is unusual for such a high amount to be set." Campaigners at the Terence Higgins Trust said the deal served as a stark warning to other employers. Lisa Power, the trust's head of policy, said several similar discrimination cases were under way. "It's clear there are a number of employers who are not up to speed with what life is like for people with HIV," she said.

"This kind of incident shows that ignorance can be a very expensive mistake." The dispute began after Mr Hedley was diagnosed HIV positive in November 1998 and took nearly three months off for treatment. He had expected to return to his £34,000-a-year post in February 1999, but was told by Aldi to remain at home.

In evidence lodged with the tribunal, Mr Hedley said Aldi had originally asked him to build up his strength before restarting work, but then changed its mind, suggesting he should look for another job. "I thought the way I was treated was appalling and I can't believe people have these attitudes in this day and age," he said. The company claimed his colleagues were "uncomfortable" working with Mr Hedley, and that his illness could directly affect sales and customer confidence. In its evidence, Aldi said its decision to keep him at home was justified "given the nature of the applicant's condition". The store said it had "genuine and understandable concern that if the applicant remained in situ sales at the store would suffer".

Despite receiving compensation, Mr Hedley has lost his job with Aldi as part of the agreement. He refused to comment yesterday. However, his lawyer, Stefan Cross, said Mr Hedley was "a very happy man". He added: "He is looking forward to the future and the prospect of a new career with hope and expectation. He is looking for new work, his experience is in retail but he is looking at other possibilities."