Compromise Agreements

When a job comes to an end in circumstances where there is a dispute or where an employer wishes to make a compensatory payment to the member of staff who is losing their job, the well advised employer will often ask the member of staff to sign a compromise agreement. So what is a compromise agreement? Employees are protected by a fairly significant number of statutory rights under law.

Some of these rights depend on completing a minimum length of service – for example, the right not to be unfairly dismissed requires a full year’s employment, while other rights arise immediate such as the right not to suffer discrimination because of a “protected characteristic” such as a person’s race, sex, age, disability, religious beliefs or sexuality.

A compromise agreement is a particular type of agreement established under the Employment Rights Act 1996 (as subsequently amended) which allows an employee to waive his or her statutory rights. A compromise agreement is not legally effective unless the employee has received independent legal advice from a suitably qualified person such as a solicitor. Usually the employer will pay the costs of this legal advice.

Therefore the employer will want to ensure that the employee receives proper advice on the terms of their leaving as otherwise any agreement made with the employee and any compensation paid to the employee will not be binding and final on the employee. The employee could still bring a compensation claim against the employer in the industrial tribunal or courts because the law will assume that if an employee was not independently advised he may not have understood the terms of the agreement.

If you are an employee who is losing their job and you are presented with a compromise agreement, you should seek a solicitor’s advice as it may be possible to negotiate a higher level of compensation. Even if you are happy with the level of compensation that has been offered and wish to keep the negotiations “friendly”, your solicitor may be able to point out some terms or attach an agreed form of reference which will make it easier to find a new job.

The solicitor may review your employment contract and seek to minimise the effect of restrictive covenants which may be relevant to your future employers. Getting professional help, from solicitors with relevant expertise, at what can be a difficult or uncertain time should make the process of change much easier. Some firms will carry out this service for a fixed fee so it can be a cost effective way of receiving legal guidance. Receiving advice on compromise agreements need not be expensive and usually your employer will pay.

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