A compromise agreement is a contract between an employee and employer, to record the terms of any termination package. The contents are entirely without prejudice, unless or until both parties sign the agreement. The law recognises an inequality of arms between an employee and employer, and therefore, one of the main requirements is that the employee obtains independent legal advice before signing the agreement.
Compromise Agreements – The Effects
Once both parties have signed a compromise agreements, it is a binding agreement, and each party can then sue on the terms of that agreement. The employer is bound to pay the financial package agreed to the employee, in return, the employee is precluded from bringing employment tribunal proceedings.
Compromise Agreements – Employee
If you are an employee how can we help? Generally speaking you would approach us at the time of any proposed dismissal when you are given the compromise agreement. We would then advise on the fairness or unfairness of the proposed dismissal, and then advise on the merits of the financial package that has been offered to you. We could then negotiate on your behalf with your employer, and only once we are happy that we have negotiated the maximum possible settlement sum for you, would we then sign off the agreement as your independent legal adviser.
Compromise Agreements – Employer
If you’re an employer how can we help? Generally speaking we would have advised on the proposed dismissal of your employee. The safest form of terminating an employee’s employment is by way of a compromise agreement. We would advise on the terms of the agreement, and then liaise with the employee’s solicitors. Only once settlement has been reached, would the employee’s solicitors then sign off the agreement, we would then advise you who would then sign the agreement, it then becomes a binding and legally enforceable agreement.