A compromise agreement, also known as a settlement agreement, is a legally binding document between an employer and employee utilised to effectively terminate an employee’s employment by mutual agreement. It allows employers and employees to settle potential disputes, and to avoid formal internal processes such as disciplinaries or grievances, and avoid the concern of the employee lodging industrial tribunal proceedings thereafter in relation to the employment or the termination of same; therefore saving both the employee and employer time, cost and potential negative publicity associated with an employment tribunal case.
Normally, an offer of compensation (for example, an enhanced redundancy package) is made in consideration of the employee agreeing not pursue such legal action against the employer.
Advice from a solicitor is essential throughout the process. The agreement must be in writing, and the employee must have the compromise agreement to review with an independent solicitor to explain the effect same has on his/her ability to pursue their rights in a tribunal, before the agreement can be considered binding. The solicitor giving the independent advice must also sign the agreement (as well as the employee and employer) and certify that the appropriate advice was provided. The cost of the independent legal advice is typically covered by the employer for a specified amount within the agreement, however where negotiation is required and costs surpass this amount, this would be covered by the employee.
These agreements are commonly used in situations where disputes have arisen and the employee and employer relationship have broken down, or in voluntary redundancy situations.
Worthington’s Employment department are experienced with dealing with compromise agreements, whether that involves drafting the agreement for the employer, providing independent advice to the employee, or assisting with negotiations.
Should you require advice with a compromise or settlement agreement, either as an employer or employee, please contact our Employment department.
Should you have any queries or would like any further information on how Worthingtons can help you in these circumstances, please contact our office on 028 9043 4015 or email [email protected].
028 9043 4015 