Compromise Agreements

When a job comes to an end, a popular way of dealing with financial issues is for both sides to enter into a written Compromise Agreement.  The major effect of this is that once it is signed neither side can go to court or lodge an application with an Employment Tribunal.  Unless a properly drafted Compromise Agreement is entered into, a dissatisfied party can still make a claim.

For a Compromise Agreement to be valid, it must comply with the following:

1. It must be in writing.
2. The Employee must have received legal advice from an independent adviser such as a Solicitor on the terms and   effect of the proposed Agreement, including its effect on his or her right  to make a claim to an Employment Tribunal.
3. The adviser must have professional indemnity insurance covering the risk of a claim by the Employee in respect of the advice.
4. The adviser must be identified in the Agreement.
5. The Agreement must state that the conditions regulating Compromise Agreements have been satisfied.

If the Compromise Agreement does not meet these minimum requirements, it is invalid.

What Should Be Included In A Compromise Agreement?

Compromise Agreements are tailored to the individual circumstances of both the Employer and the Employee.  They commonly include clauses dealing with matters such as the following:

1. Arrangements as to the period prior to the agreed termination date. In particular is the Employee expected to come into work during that period?
2. The termination payment which the Employee is to receive.  If this is for less than £30,000.00 it is normally paid tax free.
3. The provision of a reference by the Employer and its terms.
4. An agreement by the Employee that he will not make any claim to a court or tribunal in the future.
5. An agreement that parties keep the terms of the Compromise Agreement confidential.

Employment law is a complicated matter.  Legal advice is essential, for both parties, before a Compromise Agreement is entered into.  The Employer normally meets the legal expenses of the Employee, up to an agreed limit.

Ensure You Avoid The Pitfalls Of A Compromise Agreement

In Richard Godden, Ann Scott and Douglas Peters we have the expertise to deal with this matter for you and to make sure that you do not fall foul to the common pitfalls of an agreement which either do not protect you or do not provide you with the correct amount of compensation.  If you require our assistance please contact us by email or telephone 0131 222 8000 or complete an online enquiry form for a free, no obligation discussion.  We are here to help.