Compromise Agreements
Whether a direct response to the recession or not, Crawley based stevensdrake solicitors have seen a sharp rise in the number of compromise agreement cases being brought to them - from both employers and employees.
Victoria Wright, head of employment law at stevensdrake helps answer a few questions about compromise agreements
What is a compromise agreement?
It is a legally binding agreement between an employer and employee and it prevents the employee from bringing statutory claims (for example, unfair dismissal) in the Employment Tribunal. The employee is usually offered a sum of money in return for agreeing to forgo their claims, so they sign away their rights in return for a cash payment. It is, in effect, a clean break between the parties. Both then know when the employment will end; how much money the employee will be paid and it will also deal with things such as the employer agreeing to provide a reference for the employee.
Why does an employer suggest a compromise agreement?
Compromise agreements can be used where an employee is offered an enhanced redundancy payment or where the parties wish to settle a dispute. It gives the employer certainty that there will be no claims by the employee in future.
What does an employee do if offered a compromise agreement?
Contact a solicitor who is independent of the employer and arrange an appointment. Usually the solicitor will ask for a copy of the agreement to be sent to them in advance of the meeting. Employers don't always say, but they will usually want everything to be kept confidential, so it is safer for the employee to only speak to the solicitor until they have seen the document.
Why does the employee need to see a solicitor?
One of the legal requirements is that the employee has to take independent legal advice on the agreement. Without which, it will not be valid. This prevents the employee being taken advantage of. The solicitor will advise the employee on the terms and effect of the agreement and explain that it will prevent the employee bringing any claims in the Employment Tribunal.
What does it cost?
The employer usually agrees to make a contribution towards the employee's costs of seeing a solicitor of around £500 + vat. This is to encourage the employee to make an appointment and seek advice. For employers, there is usually the cost of the solicitor drawing up the compromise agreement for them.
Published - August 2009
This article is provided for general information only. Please do not make any decision on the basis of this article alone without taking specific advice from us. stevensdrake will only be responsible for the advice we give which is specific to you.
