Compromise Agreements - Employees
What is a compromise agreement?
A compromise agreement is a legally binding contract following the termination of employment. It usually provides for a severance payment by an employer, in return for which you agree not to pursue any claim you may have to an employment tribunal. Quite often, the compromise agreement will also deal with the notice element in a contract of employment and may provide for a "payment in lieu".
They are used by employers as a means to prevent possible future grievances to a tribunal, particularly in redundancy situations.
Compromise agreements are recognised by statute and are the only way a claim can be legally binding without tribunal proceedings having been initiated.
A compromise agreement needs to be examined and explained to you by an independent solicitor, or other authorised person, before the agreement becomes binding. The person giving the advice must also sign the agreement and certify that the appropriate advice has been given, this means that you get sound legal advice in ensuring that you receive everything that you are entitled to as part of your severance.
Why is a compromise agreement necessary?
If an employer does not comply with the law in making redundancies, perhaps through failing to consult properly or failing to use fair selection criteria etc, an employee can complain to a tribunal that the redundancy was unfair. This could result in an award of compensation or even reinstatement.
The use of compromise agreements in redundancy situations ensures that neither party can persue proceedings against the other in an employment tribunal.
How much will it cost me to seek legal advice?
It should cost you nothing. Your employer will usually cover the legal costs of your independent solicitor. We guarantee you will not be charged more than the amount of legal fees which your employer has agreed to contribute, which is normally set out in the agreement.
When will I receive the amount due under the agreement?
Once a compromise agreement has been signed by all parties, any agreed compensation will usually be paid within 21 days. Sometimes, it goes through in the next company pay run. The payment date is specified in the agreement.
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