Compromise Agreements
Employer Compromise Agreements
Compromise Agreements (which are sometimes called termination agreements) are a commonly used document by many employers who wish to bring to end a dispute or problem or to terminate an employee’s employment on an agreed basis. It may be that there is an ongoing claim in an employment tribunal or simply that the parties have decided they can no longer work together. Either way, a compromise agreement might be used to set out in writing the terms of a mutually agreeable settlement.
In many instances the employers will pay to the employee a sum of money, which the employee might not normally be entitled to. In exchange the employee will normally waive their claim and/or any potential claims he or she may have. To be binding, the employee must take independent legal advice on the effects of signing the agreement or the effects of a signed agreement and its consequences.
A ‘compromise agreement’ is a legally binding agreement between employer and employee following the termination of employment. It usually provides for a severance payment by the employer, in return for which the employee must agree not to pursue any claim via an employment tribunal. Many employers are turning to compromise agreements in order to speed up the ‘leaving’ process and to ensure that there are no later comebacks.
Compromise agreements are recognised by statute and are the only way a claim can be legally binding without tribunal proceedings having been initiated.
Compromise agreements must be agreed upon and signed by both parties; the specified package is in ‘full and final’ settlement of any claims an employee may have. Because a compromise agreement is a legal document and must be signed by both parties, a solicitor must be involved. They will advise on the terms and the amount of compensation you as the employer should offer, and handle negotiations with the other side until a successful agreement has been reached and signed.
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