WHAT IS A COMPROMISE AGREEMENT?
A Compromise Agreement is a legally binding Agreement, put in place in anticipation of the termination of your employment, and confirming the terms of the termination of your employment. It usually provides for a compensation payment to be made to you by your employer, in return for which you agree not to pursue any claim you may against your employer. The Compromise Agreement will also deal with the notice element in your contract of employment and may provide for a "payment in lieu" of notice.
WHY USE A COMPROMISE AGREEMENT?
The use of Compromise Agreements in redundancy situations is a relatively recent development and has been initiated mainly by employers who wish to prevent employees bringing a claim to a tribunal after their employment has ended.
If an employer does not comply with the law in making redundancies (perhaps through failing to consult properly, failing to use fair selection criteria etc) an employee can complain to a tribunal that the redundancy was unfair. This can be done after the redundancy if there is no Compromise Agreement and could result in an award of compensation or, rarely, reinstatement.
The only way an employer can encourage an employee not to make a claim to the tribunal after redundancy is to persuade the employee to sign away their right to do so. This can be done in a Compromise Agreement and has the effect of turning the termination package into a "full and final" settlement of any claims the employee has against the employer.
Compromise Agreements are also commonly used in employment situations other than redundancies and have the same “full and final” effect.
WHAT IS CONTAINED IN A COMPROMISE AGREEMENT?
The Compromise Agreement will state the full amount of the payment you are receiving and the extent to which the sums will be paid free of tax. Usually, up to £30,000 compensation can be paid without deduction, but you will have to a give tax indemnity to your employer within the Agreement. This is entirely usual.
The Compromise Agreement will often provide for confidentiality both in terms of your employers trade secrets, confidential information and business affairs and also of the terms of the Agreement. You have to be paid a smaller additional sum for agreeing to this; the nominal sum involved varies from fifty pounds to a few hundred pounds. You will also usually agree not to make any derogatory comments about your employer. This provision can be mutual, and employers are often receptive to such a request from employees.
The Compromise Agreement may confirm the existing post-termination restrictive covenants that you are already bound by under your contract of employment. In some cases, the covenants are new. In either case, you need to take specific advice on this as your ability to work for a competitor and/or service old clients and customers could be hampered.
There will be a long list of possible claims in the Compromise Agreement such as the Discrimination Act and many more, under which you will agree not to bring a claim. You should not be concerned by this; the Compromise Agreement is intended to be in full and final settlement of all claims.
WHY DO I NEED A SOLICITOR TO ADVISE ME BEFORE SIGNING A COMPROMISE AGREEMENT?
Compromise Agreements can be written in very legalistic language and can refer to sections of Acts and Regulations which you may never have heard of. Because of this, and because it is important that you understand the effect of the Agreement, it is a legal requirement that you obtain professional advice on what the Agreement means. It is also a legal requirement that your adviser signs the Agreement to confirm that the advice has been properly explained to you.
According to the Employment Rights (Dispute Resolution) Act 1998, the advice can only be given by a qualified lawyer, a qualified trade union official, or a qualified advice centre worker, all of whom must be covered by an appropriate certificate of indemnity insurance. We will advise you if the terms offer you the correct protection and will also advise you if you are being offered a suitable amount of compensation. The number of years you have worked, your salary, your Contract of Employment, and most important of all, the reason for the termination are all important factors.
Compromise Agreement Petworth Compromise Agreement Storrington Compromise Agreement Billingshurst Compromise Agreement West Sussex
