Thursday 20 October 2011

Compromise Agreements

Article by
Nidhi Chopra
With the recession continuing to affect the economy, I am finding a significant increase in Employees seeking advice on Compromise Agreements that have been given to them by their Employers. 

More often than not the Compromise Agreement is presented to the Employee when the Employer wants to terminate a contract of employment, settle existing disputes and/or curtail the risk of future claims. The existence of the Compromise Agreement can be kept confidential and all discussions relating to it should be on a without prejudice basis. 

A duly signed Compromise Agreement is a binding agreement between the Employer and Employee whereby an Employee gives up certain legal rights and statutory claims such as unfair dismissal, discrimination or redundancy payment that are otherwise protected under employment law regulations, usually in return for a payment and other benefits. 

A Compromise Agreement can be an efficient and advantageous way forward for both the Employer and Employee.  Where the Employer is usually keen to pay a sum of money in return for the security that the risk of any claims and litigation from the particular Employee would be diminished; the Employee has the incentive to agree to the terms of the agreement because the amount of money offered is usually more or equal to what a potential claim would be worth if he or she were to follow through formal proceedings, bearing in mind the cost and stress of undergoing any such litigation.

Once the Compromise Agreement is ‘signed off’ a legally binding contract will have been created between the Employer and Employee. It is therefore extremely important for both parties to have the document well drafted. The agreement will be different in every case, varying in the extent of how it has come about, provisions, warranties given by the Employee and list of claims that are being compromised. 

The document itself is subject to various regulations which must be complied with for it to be valid and enforceable and one of those rules is that it can only be binding if the employee has had advice from an independent qualified legal adviser, for example a solicitor. It is common for an Employer to offer to pay a contribution towards the Employees legal fees for obtaining this advice.
The legal adviser will go through the document with the Employee and explain the contents and the effect of the agreement and will sign the agreement confirming that the advice has been given to the Employee. 

Whether you are an Employee that has been presented with an offer entailed within a Compromise Agreement, or an Employer who thinks that a Compromise Agreement can be a useful tool in a situation, you should get advice from a solicitor as soon as possible. You can contact me by telephone on 01992 422 128 or by email: for advice.

Article written by Nidhi Chopra, our employment expert      Tel: 01992 422 128

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