The Meaning of a Compromise Agreement

Well, you can’t please everybody every time. This also applies to employer/employee relations. Sadly there are times when not everything goes smoothly and, regardless of the reason, the employee, for whatever reason, needs to be let go.

The circumstances surrounding the departure may be contentious or perfectly amicable. Redundancy, in particular, is often the reason for making a compromise agreement. The main point of the agreement is that when an employee leaves the company, the parting can be achieved with employment ending on agreed terms.

Having a compromise agreement ensures protection for the employer, which is why it can be a valued document to obtain. Any further future claims the employee could otherwise make may be prevented. This of course brings a great peace of mind for the employer.

A compromise agreement can be offered to a departing employee either before they leave or after employment finished. The important thing to remember is to include the words: Without Prejudice. This means that if the agreement is not accepted, its terms cannot be used as evidence in any later proceeding.

While this might be good news for the employer, shouldn’t both parties have protection rights? Yes! That’s another good reason for setting up a compromise agreement.

An employee will be offered a settlement sum – often one of the main reasons for entering into the agreement in the first place. This is limited to a specific amount but it is also customary, although not a legal requirement, for an employer to pay the legal costs incurred by the employee. In this way it ensures an employee cannot start making absurd claims, leaving the employer stripped of all funds. In order to settle the matter legally and avoid future problems, before proceeding, it is good for the employer to consider the payment figure due to the employee.

Drawing up a legal compromise agreement is a sensible decision; it offers a simple precaution, avoiding costs of tribunal proceedings that could occur at a later date.

To be valid, the agreement must be in writing and specify the claims being settled. In addition, the employee should seek independent legal advice from specialist compromise agreement solicitors. These solicitors will advise on the terms of acceptance and check that the conditions that regulate these agreements are satisfied.