My Employment Rights

I need advice on a compromise agreement

In certain situations, employers will ask departing employees to enter into a compromise agreement. To do so, employees are required to take independent legal advice on the terms of the agreement.

If you do not have a solicitor and would like to be referred to an employment specialist, please enter your details below. We will then forward this information to one of the experts from our panel in your area, who will contact you within 24 hours in order to arrange a meeting/obtain the necessary information from you.

In certain cases it may not be possible to appoint a local adviser. In that case, the nearest and most appropriate adviser will be chosen. In practice, there is no specific need for you to see the adviser in person and you can easily manage the process by telephone, letter and email.

What is a compromise agreement?

A compromise agreement is a legal agreement entered into between employer and employee. The purpose of the agreement is to set out the terms on which the employee's employment is to be terminated and/or claims against the employer settled.

Why do I need it?

Under almost all employment laws, it is not possible for an employee to sign away rights to pursue claims against their employer without entering into a compromise agreement. The reason for this is to give protection to employees and prevent them from being forced into signing away their rights.

Why do I need to take legal advice?

One of the legal requirements for a compromise to be valid is that the employee has received advice from a solicitor, barrister or other qualified person as to the potential claims that they may have and the effect of signing the agreement. The adviser must sign a statement to say that they have provided the advice.

What happens if I do not get legal advice?

The implications for the employee would be negligible if advice was not obtained and they would still be entitled to any payments/benefits that the agreement provided.

However, it is unlikely that an employer would be willing to waive the requirement as, in effect, it would not be able to rely on the settlement of the potential claims against it. On that basis, it is likely to make the receipt of legal advice a condition of the agreement.

What issues are generally included in a compromise agreement.

There are broadly 3 areas that are covered:

1. Employee benefits - details of the severance payment and other benefits that the employee will receive. This can include cash payments, pension contributions, share scheme entitlements, transfer of property such as company car or mobile phone, provision of outplacement counselling and contribution of legal fees.

2. Employer benefits - details of claims that are being settled, return of company property, resignation of directorships, imposing new post-termination restrictions.

3. Mutual - confidentiality, announcement wording.

Will my employer pay my legal costs?

There is no legal obligation to do so, but it is generally the case that the employer will offer to make some payment towards legal costs. This is an issue that can be handled as part of the negotiations.

What will a solicitor do?

They will talk to you about your employment, the reasons for the compromise being presented to you and will advise you of the possible claims that you might have. They will advise you of the implications of signing away such claims and give you a view on the merits of accepting the offer that has been put forward.

They will also review the wording of the agreement and negotiate with your employer as necessary to get the best deal.

Once you submit your details, they will be passed on to a solicitor, who will contact you with the next 24 hours to make arrangements to meet with you/obtain the necessary information.