Compromise Agreements Can Benefit Employees And Employers

Anyone who has a job will know that both employees and employers have certain rights and duties towards one another.  Many of these can be found in a formal contract. Others will be ‘implied’ by statute or custom and practice. These rights are in place to benefit and protect both the employer and the employee. Having them written down ensures that both parties have the right expectations.

However, there may come a time when the employer and employee have to part company, either because of a breakdown in relations, redundancy or any number of other reasons.  The situation can become a little tricky.

If your employer has broken the employment contract or treated you unfairly, you may be able to bring a claim against your employer, for example unfair dismissal, breach of contract, discrimination etc. In most cases both parties will want to avoid Employment Tribunal proceedings which can be expensive, time consuming and usually fairly stressful.

It can benefit both parties to enter into a compromise agreement. This is a formal document invented in 1993 by an Act of Parliament.  But what is a compromise agreement? It’s a document that records an employee’s agreement with an employer, stating that they will not pursue an employment related claim, such as breach of contract or unfair dismissal. Usually, this agreement is in exchange for a sum of money.

Both parties should consider a compromise agreement at an early stage, taking into account the risks and uncertainties of Employment Tribunal proceedings. There are a number of mandatory requirements that should be in place for the compromise agreement to be valid.  For example, the agreement must be made in writing and cannot be verbal; the written agreement should relate to a particular complaint that has been made by the employee, rather than a blanket settlement of all claims.

Perhaps most importantly, the employee must receive legal advice or the agreement will not be valid. This is to ensure that the employee has a full and comprehensive understanding of the terms and potential consequences of the proposed compromise agreement. This is important because sometime an employer will try to insist that the employee agrees to the compromise agreement before getting legal advice.

If your employee asks you to agree to compromise agreement before you’ve had legal advice, let them know that you can’t! The law does not allow you to. Take good legal advice and then make a decision.

In addition to the above requirements, the compromise agreement also state that the conditions regulating compromise agreements have been fulfilled.  It is important that, as the employee, your compromise agreement is bespoke to your own individual circumstances.

So the compromise agreement is a great tool for both the employee and employer. It can help to avoid costly legal proceedings.  If you find yourself in a tricky situation with your employer, then you may want to consider whether a compromise agreement may be the answer.