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COMPROMISE AGREEMENT SETTLEMENT - EMPLOYMENT COMPENSATION SOLICITORS


SOLICITORS HELPLINE 0345 515 0657


Our specialist solicitors provide representation for all matters related to employment law in the United Kingdom. They are qualified to give advice on settlement agreements, formerly known as compromise agreements to employees which is a legal requirement, contained in statute, prior to the execution of any such arrangement. Most employers will pay either in full or in part for the legal costs associated with an employee taking compromise / settlement agreement advice from a lawyer.

A legally enforceable document signed by both an employer and an employee containing agreed terms of the termination of employment is known as a compromise or settlement agreement. Both parties usually take into consideration the terms of the previous contract, statutory obligations and conduct of both sides and their respective bargaining positions before coming to agreement on financial compensation for loss of employment. This type of arrangement avoids publicity that may be detrimental to the company, saves on the legal costs of a potential hearing in court or in the Employment Tribunal and allows for the certainty of the amount of payment to the former employee.

Conditions

Compromise agreements were first introduced by legislation in 1993 with the purpose to legally bind both parties to the terms of a settlement. For this type of arrangement which is now known as a settlement agreement to be binding and valid, the following conditions must be met :-

  • The conditions and terms must be in writing.
  • The employee must obtain compromise agreement advice from one of the following :-
    • qualified lawyer or barrister
    • fully qualified representative of the trade union
    • authorised and certified worker in an advice center
    • member of the Institute of Legal Executives under the supervision and employment of a lawyer

Catch All Clause

Perhaps the most important thing to bear in mind when considering signing a compromise / settlement agreement is that in signing the agreement and accepting the settlement terms you specifically exclude your right to make a claim against your employer in a Civil Court or the Employment Tribunal. If however the arrangement only covers certain topics for example redundancy then notwithstanding agreement and signature in regards to redundancy it is still left open for a claim to be made to a Court or to the Employment Tribunal in regards to an other matter for example discrimination or harassment. Employers will often attempt to persuade employees to sign 'catch all' agreements whereby the employee signs away all of his future rights however there is some question as to the legality of such wide ranging clauses and most professional representatives when proffering compromise / settlement agreement advice would not recommend that such an arrangement be entered into. One important justification for an employee to be required to take compromise / settlement agreement advice is to ensure that they are aware of the consequences of signature particularly in regards to 'catch all' clauses which can restrict an employees right to take future action.

Negotiation

After consideration of the terms there is no requirement for an employee to sign if that person is not happy with what has been offered and the matter can be referred back to the employer for further consideration however it must be borne in mind that many employers offer more favourable terms than they are required to do at law and in the event of a disagreement may prefer to rely on the statutory minimum sum which could be less than that previously offered in the proposed compromise / settlement agreement.


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