An Overview of Compromise Agreements 

A Compromise agreement is a document which contains the terms governing the termination of an employment contract. In short, it defines the relationship after employment ends. It is the most cost effective and time saving of the three.

The main purpose behind a compromise agreement is that in exchange for a financial package, the employee will waive the right to be able to bring certain claims against the employer in an employment tribunal. It is in essence a “full and final settlement” for any potential claims. It is therefore necessary that both the employer and employee understand the employment rights which will cease to exist upon the signing of a compromise agreement.

The London Compromise Agreements sets out an overview of the elements which make up a compromise agreements and it may also be referred to as a severance agreement of termination agreement.

A compromise agreement is a document containing the terms governing the termination of an employment contract. In order to be legally binding a compromise agreement should fulfil some of the conditions like the agreement must be in writing. It must relate to a particular complaint and the employee must receive independent legal advice. It also includes that the advisor must have in force a professional indemnity policy. The agreement must identify the adviser. The agreement must state that the conditions relating to compromise agreements have been satisfied.

The agreement also contain details of the financial package which has been offered or negotiated as well as other terms governing the end of the employment relationship.

The above requirements have to be incorporated into any compromise agreement it is important that a compromise agreement should be negotiated and drafted to fit the specific circumstances. For example if the employer is offering the employee a financial package above what is the contractual and statutory minimum, then the employer may wish to introduce  new restrictive  covenants into the compromise agreement or other provisions to protect their business interests. For an employee being made redundant, they may wish to have certain restrictive covenants removed or shortened in order to get a new job.

Employment law is a specialised area of law and you should always take advice from an employment lawyer and let them guide you through the relevant employment issues.

London Compromise Agreements provides a general understanding of compromise agreements. Each compromise agreement should be drafted to fit each individual’s circumstances.

The key issues in a compromise agreement only involve a few relevant facts. To help identify these key issues it is advisable to seek the advice of an experience employment solicitor, and an initial telephone conversation can be invaluable. At Stone Joseph the initial telephone conversation is non-chargeable, so you will be able to get the advice of one of our specialist employment partners and from the outset you will be aware of the full picture and have a recommended strategy.

In any compromise agreement there should be a clause stating that the employee will be paid their salary and all contractual benefits up to and including the termination date. If the employee has any accrued holiday pay this may be mentioned here. In case the employee has taken in excess of their holiday entitlement then this will be deducted from the final pay cheque.