Compromise Agreements – Employment Law Advice for Employers

What is a Compromise Agreement?

A Compromise Agreement is a contract where the employee agrees to compromise their legal claims against you, the employer, on agreed financial and other terms. It is usual for you to provide a severance payment in return for your employee’s agreement not to pursue any claims in a tribunal or a court. Also, if you do not have the time or cannot subject the business to the risk of going through a full procedure (disciplinary, performance or otherwise), a Compromise Agreement may be used.

When may a compromise agreement be used?

If you are finding yourself in one of the following situations, the best solution may be to consider a ‘clean break’ and offer the employee a compromise agreement.

• You are making an employee redundant.
• There is, or there will potentially be a dispute between you and the employee, whether in the form of an internal grievance or a Court or Tribunal case.
• If there are difficulties, or things are just ‘not working out’ with an employee.

Compromise Agreement – without prejudice

If you are proposing to dismiss an employee, or an employment tribunal claim or internal grievance has been brought against you, you may want to hold a ‘Without Prejudice’ discussion with your employee first. A Without Prejudice’ discussion allows both parties to discuss the situation freely without having the threat of saying the wrong thing. Communication in this type of meeting cannot be used legally against the party in question.

What are the standard terms in a Compromise Agrement?

In addition to clauses about payment terms and references, compromise agreements usually contain terms preventing one or both parties from making disparaging statements about the other. Compromise agreements also often require the employee to keep the compromise agreement confidential. Often, employers will ask that the employee provide an indemnity against any tax payable on the compensation sum.

Who pays for the advice on the Compromise Agreement?

Usually, you will have to contribute a sum towards your employee’s legal costs but we can discuss this further with you and explore all options available.

How Do I Contact Knight-Webb Solicitors?

If you are an employer and thinking about issuing a Compromise Agreement, or have any other employment related legal concern please do not hesitate in contacting us today. We have many years of experience in employer-related legal concerns.

I Live Outside of London, Can I Still Speak to You?

Even though we are based in London, we have many clients further afield, if you are based outside of London please contact us today and we can arrange a telephone conference.