Compromise Agreements

Employees may have claims against their employer under both their contract of employment and any relevant statute, and these claims may arise on recruitment, during employment or on termination. In many cases the employer will want to make a payment to the employee in return for an effective waiver of such claims. This usually saves time and costs for both parties.

The employee receives an agreed sum of money under the agreement, which can often be paid tax free, in return for agreeing not to bring a claim. The employee may also be able to agree the wording for a reference. Such agreements are called compromise agreements and are also known as termination agreements or severance agreements.

Legalities.

Accordingly most employers will have the agreement drawn up by an employment lawyer. The agreement must be in writing, and must specify the particular complaint which the employee is agreeing to compromise. However any agreement to settle or waive any statutory claims will be void unless it is recorded in a compromise agreement that complies with certain statutory requirements. One of these requirements is that the employee receives independent legal advice as to the terms and effect of the proposed agreement. The agreement must identify who the adviser is and it is usual for the employer to pay some or all of the costs involved in taking this advice. Finally the agreement must state that the conditions regulating compromise agreements are satisfied.

Compromise Agreements are an effective way of resolving a variety of employment disputes and provide an effective and viable method of avoiding legal proceedings and the consequential time costs and monetary expense for both parties. Please contact us on 01928 736672 or complete our questionnaire if you require a Compromise Agreement drafting or if you need advice in relation to one that has already been prepared.