Case Studies

Case Study 1: The 'Generous' Compromise Agreement

The Employer is making a number of redundancies and is offering an enhanced redundancy package to a number of employees provided that they agree to enter into a Compromise Agreement. The Employer wants the Compromise Agreement in place as an assurance that there is no possibility of the employees suing for any perceived breaches of contract or statute, The Compromise Agreement will clearly set out that the Employee is giving up the right in statutes, particularly, in this case, any claim for unfair dismissal on account of the redundancy. If the process for redundancy selection is uncontroversial and the settlement package in the Compromise Agreement is above the statutory minimum payment for redundancy, the independent advice is likely to recommend that the Compromise Agreement be signed by the Employee in order to benefit from the enhanced payment

Case Study 2: ‘Negotiated’ Compromise Agreements

The Employee decides to raise a formal grievance against the Employer for discrimination and also for unlawful deductions from wages. The Employer did not follow the correct grievance procedures and failed to investigate the complaint thoroughly. The Employee appeals the grievance and considers the outcome to be unsatisfactory. The Employee makes clear that she is willing to instigate Tribunal proceedings whilst continuing her complaint for discrimination and unlawful deductions from wages. The Employer invites the Employee to a “without prejudice” meeting to discuss how these claims might be settled by way of Compromise Agreement. The Employee takes legal advice and reverts to the Employer with a figure for settlement in a Compromise Agreement to include repayment of the deductions from wages, a sum for injury to feelings for discrimination, and future loss of earnings. The Employer agrees to the amount proposed and provides a Compromise Agreement for the Employee to sign in which she gives up the right to sue in exchange for a suitable settlement sum.

Case Study 3: The ‘Smokescreen’ Compromise Agreement

The Employer proposes a Compromise Agreement where an Employee has had recurring health issues leading to long absences from the office. The offer of settlement proposed in the Compromise Agreement is seemingly a high one but when the Employee takes independent legal advice (as is required for a legally binding Compromise Agreement), the advice is that the Employee has a claim substantially higher than that being proposed by the Employer. The Employer and Employee do not agree terms since neither side is willing to compromise sufficiently. The Employee decides to withdraw from the negotiations about the terms of the Compromise Agreement and starts proceedings in the Employment Tribunal. These are funded by legal expenses insurance which the Employee has as part of his household contents policy. The Employee succeeds at the Employment Tribunal in recovering an amount of damages substantially in excess of the original offer that the Employer proposed in the Compromise Agreement.

Case Study 4: References in Compromise Agreements

The Employee is suffering bullying and harassment from his manager and has decided to look for another job. The Employee finds another job but as he works in a very small industry he is concerned that his manager is likely to spread malicious rumours about his employment that may influence prospective employers and prevent them from offering him a new job. The Employee decides to take legal advice and his solicitors write to his Employers citing the incidents of bullying and harassment and suggesting a Compromise Agreement. It is a condition of the Compromise Agreement that an “agreed reference” is provided which provides that the Employer is not able to vary the reference agreed. A copy of the agreed form of reference is provided in a schedule to the Compromise Agreement itself. The Employee’s solicitors also provide for a clause in the Compromise Agreement prohibiting the Employer and, in particular, the manager, from saying anything derogatory about the Employee. The Employee is able to leave the employment with a payment from the Compromise Agreement and accept the new job offer content in the knowledge that the terms of the Compromise Agreement will protect him from anything derogatory or defamatory being said by his former manager.

Case Study 5: The ‘Negotiated’ Compromise Agreement (II)

The Employee and Employer have a falling out due to a dispute over alleged performance issues and “without prejudice” discussions begin to try and formulate terms for an exit by way of mutual agreement. A Compromise Agreement is drafted and is heavily negotiated by both sides with the Employer’s original offer initially being rejected and then negotiated upwards. The Employee is willing to start Employment Tribunal proceedings if he does not get the terms he is asking for. In the end both sides agree that Compromise Agreement including a package with a tax-free element enabling the employee to walk away with the equivalent of 6 months pay is an acceptable compromise. The Employer agrees to pay an enhanced contribution to legal fees which is specified in the Compromise Agreement itself, but this does not cover all of the Employees legal fees for the exit, since the negotiations have been extensive and therefore the Employee has to bear some of the cost of the legal fees when he has received his settlement in the Compromise Agreement.

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Compromise Agreement Advice by Silverman Sherliker, Solicitors.

Regulated by the Solicitors Regulation Authority