WHAT IS A COMPROMISE AGREEMENT?

A Compromise Agreement is a contract which employees often enter into with employers when they are leaving their employment. Compromise Agreements are particular kinds of contracts which derive from Employment Law legislation. They have to be in a specific form to be effective, and they can only be entered into if the employee has been advised by a specialist Employment Law adviser, such as an Employment Law solicitor.

Compromise Agreements are entered into in a variety of situations. The most common situation is when an employee has agreed with the employer that the employment is to come to an end, for example because of redundancy, or by mutual agreement, and the employer has proposed a severance package under which the employee will receive various benefits on leaving the employer. The kinds of benefits typically covered by a Compromise Agreement include compensation for loss of office or employment, notice pay, holiday pay, share options, pension arrangements, employment references, and any other benefits arising from the employment itself.

Compromise Agreements are also entered into in more contentious situations where there has been a dispute between the employee and the employer, or where there is a potential dispute between them. For example, an employee may feel that there has been an unfair dismissal, or an unfair selection for redundancy. The employee may feel that there has been a breach of the employment contract, or that the employer has discriminated against the employee unlawfully. The employee may simply feel that the employer has been treating the employee unfairly. Either the employee or the employer may feel that the employment relationship is not working, and that the best thing to do is to bring it to an end by way of a Compromise Agreement. In all of these situations the employee will have potential Employment Law claims against the employer, and Employment Law provides that the only way in which to validly settle these claims is through a Compromise Agreement. Compromise Agreements can be entered into either before the employment relationship ends, after it has ended, or even while Employment Tribunal proceedings are ongoing.

Compromise Agreements have different purposes for different parties. For employees, Compromise Agreements provide details of the payments and benefits which the employee is to receive on leaving the employer, and they give the employee a contractual right to receive them. Compromise Agreements can also provide that the employee will receive a particular form of employment reference in the future. For employers, the real purpose of Compromise Agreements is to allow them to agree with the employee that in exchange for giving the employee certain payments and benefits, the employee will agree that there will be no future legal action by the employee against the employer. Compromise Agreements are designed to give the employer peace of mind, in that they provide that the employee will waive any Employment Law claims that might be made against the employer.

Because an employee who signs a Compromise Agreement is likely to be agreeing to waive their Employment Law rights against the employer, Employment Law legislation has put in place strict requirements that have to be followed when entering into a Compromise Agreement. These requirements, in particular the requirement that the employee be advised by a specialist Employment Law adviser, such as an Employment Law solicitor, are designed to safeguard the interests of the employee, and to ensure that the employee does not waive any Employment Law claims without receiving proper professional advice.

At Compromise Agreement Solicitors we are in a position to provide employees with the best possible advice on all aspects of Compromise Agreements and Employment Law.

To speak to one of our Compromise Agreement and Employment Law Specialists call us for a no-obligation discussion on 0131 554 8649. Alternatively you can email us at info@compromiseagreementsolicitors.co.uk or complete one of our online enquiry forms.