What is a Compromise Agreement?
What is a compromise agreement and what is the benefit to you, the employee, (and your employer) in having one?
A compromise agreement is a legally binding agreement following the termination of your employment or it is used as a means of resolving a grievance or disciplinary during your employment or in some cases of redundancy. The result in all cases is to bring your employment to an end without recourse to legal action. Compromise Agreements are the only way you can validly “contract out” of your employment law rights such as your notice period. Compromise Agreements are in effectively is a settlement agreement.
Compromise Agreements usually provide for a severance payment, in return for which you agree not to pursue any employment claim or grievance you may have in an employment tribunal. The first £30,000 of this compensation sum often can be made tax free. The compromise agreement will also handle your notice pay, outstanding holiday, expenses, terms of confidentiality and reference.
You must take independent legal advice from a compromise agreement solicitor about the terms of the compromise agreement for it to be legally binding. The Compromise Agreement solicitor will be required to complete a certificate confirming that you have received this advice. Your employer will normally contribute towards the cost of this and the sum will be specified in the compromise agreement itself.
Employers use compromise agreements as a means of preventing complaints to a tribunal against them as you are effectively waiving your rights by signing one. It follows that even where an employer has followed a fair process, during a grievance or disciplinary hearing many still ask an employee to sign a compromise agreement to prevent a later claim for unfair dismissal or discrimination.
Being offered a compromise agreement can be beneficial to you as not only will you be granted compensation but this will be subject to an agreed timescale. You also get the chance to have a job reference attached to the compromise agreement which you have agreed in advance. This gives you piece of mind about what will be said about you to third parties. This coupled with clauses of confidentiality and clauses preventing either party from making disparaging remarks about the other secures your position.
Our employment lawyers may also be able to negotiate the amount being offered in the compromise agreement and – or make the terms far more advantageous. Many employers are receptive to reasoned arguments if this means a swift resolution and avoiding a tribunal claim. See our full leaflet download to address all your questions about compromise agreements.
We have four solicitors who can advise on compromise agreements.