Compromise Agreement: What is a Compromise Agreement?

What is a Compromise Agreement?

Please be aware that Compromise Agreements are now called Settlement Agreements. Please see http://www.foxwhitfield.com/settlement-agreements/

A compromise agreement is a legally binding agreement between an employer and employee that settles a dispute between them. Employers are increasingly using compromise agreements at an early stage of a dispute to prevent possible complaints in the tribunal.

A compromise agreement is the only way an employee can validly “contract out” of their employment law rights. It usually provides for a severance payment and an agreed reference, in return for which the employee agrees not to pursue any claim or grievance they may have in an employment tribunal. Without a valid compromise agreement an employee might be able to take the money and then still bring a claim. Employers should always ensure they get advice to ensure the agreements are up to date and binding.

It is thought that the increasing use of these agreements may be part of the reason why the most recent statistics from the Employment Tribunal show a 15% reduction in Employment Tribunal Claims.  In a survey conducted last year by the Chartered Institute of Personnel and Development more and more employers (7 out of 10 surveyed) were using compromise agreements rather than risk the costs and uncertainly of employment tribunal claims. Our experience is that there are more not fewer disputes between employers and employees than ever at the moment.

Employees must take independent legal advice from a lawyer on the agreement for it be valid and the employer will normally pay towards the cost of this advice. Fox Whitfield regularly advise on and negotiate agreements for both employers and employees.

Paul Whitfield can be contacted on 0161 283 1276 or paulw@foxwhitfield.com

Fox Whitfield is regulated by the Solicitors Regulation Authority  – Roll Number 524972

Fox Whitfield Solicitors Head Office is based in Manchester with branches throughout the UK to help both employers and employees with compromise agreements.