What are Compomise Agreements?
Compromise agreements are legally binding agreements in which the employee agrees not to pursue any claim they may have to an employment tribunal and in return the employer usually provides a severance payment. Notice, as outlined in the contract of employment, is usually included in the agreement and generally provides for a “payment in lieu”.
Compromise agreements are recognised by statute law.
The employee must seek advise from an independent solicitor before the agreement becomes binding. The solicitor giving the advice must also sign the agreement and certify that the appropriate advice has been given.
What terms does a Compromise Agreement have to contain?
The compromise agreement will state the full breakdown of the payments to be made to the employee and the extent to which the sums will be paid free of tax.
Compromise agreement also provide for confidentiality both in terms of business affairs and also of the
terms of the agreement and usually contain a mutually applicable clause about derogatory comments.
The compromise agreement may confirm the existing post-termination restrictive covenants that the employee is already bound by under their contract of employment. In some cases the covenants may be new.
There will be a long list of statutes in the compromise agreement, such as the Equality Act and many more under which the employee will agree not to bring a claim. The agreement is intended to be in full and final settlement and therefore every eventuality will be listed here.