Compromise Agreements

A “Compromise Agreement” is the only way in which Employees and Employers can legally settle a dispute arising under a contract of employment.

Section 203 of the Employment Rights Act 1996 ("ERA") stops an Employer in the UK from forcing an Employee to sign away their legal rights except where a Compromise Agreement is used.

Negotiating a Compromise Agreement is often straightforward but in some cases can prove to be more difficult. For instance, the employee may put a value on his or her claims above the amount the Employer is prepared to offer even though such amount may be above the employee's strict legal entitlement.

Compromise Agreements- the Requirements.

There are strict conditions as to how Compromise Agreements must be drawn up if they are to be legally binding. These are:

  1. The agreement must be in writing
  2. The agreement must relate to a particular complaint
  3. The employee must have received advice from an independent solicitor as to the terms and effect of the proposed agreement in particular, its effect on his/her ability to persue his/her rights before an Employmentt Tribunal
  4. The adviser must have professional indemnity insurance
  5. The agreement must identify and be signed by the adviser
  6. The agreement must state that the conditions regulating Compromise Agreements under the Act are satisfied

Care must be taken when drafting Compromise Agreements to specify all of the possible claims that an employee is being asked to compromise. These will include claims under contract or under statute law. If the Compromise Agreement does not make this very clear it will not be in full and final settlement of all such claims.

It is also important that the Compromise Agreement is properly worded to deal with issues relating to continuing obligations such as confidentiality as well as more mundane ones such the return of a company car.

We can provide legal representation for both employees or employers.

For further information call or e-mail Marlene Hession.

T: +44 (0) 161 833 0578
E: marlene.hession@fdl-law.co.uk