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Employment - Compromise Agreements

If you have been released from your employment and have subsequently been asked to sign a Compromise Agreement, you need to seek professional advice. This is a legal requirement which is in place to protect you and your rights, preventing you from being legally bound to an agreement with unsuitable terms.

What Is A Compromise Agreement?

Compromise Agreements can be made upon the termination of employment, and sets out an arrangement between employer and employee. While the terms of each will vary, the agreement will involve a kind of ‘deal’ whereby the employee receives severance payment, and in return agrees not to pursue any form of claim against the employer.

Indeed, if an employer feels they have been unfairly dismissed – perhaps because they are unhappy about the nature of their redundancy – it is possible to take their grievance to an Employment Tribunal. Here a panel will hear the evidence from both parties and determine whether they find in favour of the Claimant or the Respondent. If successful, an employee could be awarded compensation, or even be reinstated to their former job.

With a Compromise Agreement, however, an employee forgoes their right to take a claim to a Tribunal Court. Once it has been signed the agreement becomes a ‘full and final’ settlement of any claims against the employee, which is then recognised in statute as legally-binding.

The Terms of a Compromise Agreement

A Compromise Agreement will generally include the following terms:-

• Details on redundancy payments, and how much will be paid free of tax;
• Confidentiality clauses;
• Conditions which state you must not say anything derogatory about your employer (if you wish you can make this agreement mutual);
• Restrictive covenants, which prevent you working for an employer’s competitor and/or taking on the employer’s clients;
• That you will not bring a claim against an employer on the basis of racial discrimination, sexual discrimination etc.

If you are not happy with the terms of the agreement, then you do not have to sign it. You can either negotiate a modified version of the agreement, or you can refuse it altogether, leaving you free to make a claim.

You Need Professional Advice

Under the Employment Rights (Dispute Resolution) Act 1998, you must obtain professional advice before signing a Compromise Agreement. This can be from a lawyer, a trade union official or a trained advice centre worker. Your appointed advisor will review the agreement, explaining the implications and ensuring you fully understand what you are consenting to. This is to ensure the terms of the agreement – particularly payments and future restrictions – are in your best interests. Your advisor must then sign the agreement, stating that their professional services have been rendered.

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