Why Should I Use A Compromise Agreement

1. Why should I use a Compromise Agreement?

A Compromise Agreement is the the only way in which an employer can settle of all the possible claims that a departing employee may have.

If as an Employer you wish to be certain of avoiding an Employment Tribunal claim being brought by an Employee then a Compromise Agreement is the only solution.

S.203 of the Employment Rights Act makes any agreement (except a Compromise Agreement) void if it tries to prevent an employee from bringing proceedings to enforce their statutory employment rights

2. When should I take advice ?

As soon as possible. The greater the degree of preparation the greater the chances of a your being able to achieve a sensible negotiated exit.

3. Do I have to make a contribution to an Employee’s legal costs?

There is no legal requirement for an Employer to make a contribution to legal costs. However almost all Employers now offer such contributions since they recognise that the burden of paying legal fees is greater on an Employee than an Employer. The contribution can range between £350 + Vat through to larger sums where complex and lengthy negotiations take place in relation to the departure of more senior employees or company directors.

4. Do I have to get the employee to take independent legal advice?

Employers are sometimes nervous about suggesting that Employee seek independent legal advice for fear that this may result in an Employees expectations being 'talked up' by the solicitor. This is, of course, a possibility but so long as the offer being made to the employee is a reasonable one, the Employer should be able to resist any attempt to talk it up. Since obtaining independent advice is a requirement of S.203 of ERA, if a solicitor does not provide the advice then a Compromise Agreement has no legal standing.

5. What if the Employee has a dual contract ?

These can be more complex settlements to negotiate and inevitably will require advice in relation to both English law and the law of the second jurisdiction of the employment relationship. We can obtain advice from overseas lawyers on your behalf and provide you with comprehensive advice as to your rights under both English law and that of the overseas jurisdiction.

6. What documentation and information will my solicitor need to draft the agreement ?

1. A copy of the Employees’ contract of employment and any letter of appointment.

2. All documentation regarding the Employee’s fringe benefits. These may be set out in a company handbook and/or there may be scheme documentation relating to share options, bonuses, commissions, death in service benefit, permanent health insurance, health insurance and pensions.

3. All correspondence whether by e-mail or letter in which the reasons why you are considering offering an Employee a Compromise Agreement.

4. Details of the Employee’s pay.

5. Proof of identity such as a passport or photo driver’s licence of a director of the employing company. In the case of a partnership or sole trader being the Employer proof of identity such as a passport or photo driver’s licence for a partner or the sole trader.

6. Proof of residential address such as a utility bill, a bank or credit card statement (any of these must be less than 3 months old) for the person providing the proof of identity.

7. Can I use a Compromise Agreement I have just bought off the Internet?

There is not reason you cannot do so but there are pitfalls. The document may not be up to date and therefore you may not bring to an end a claim which you otherwise thought was being compromised. There is also the difficulty that there may be other issues which you have not considered or which are not covered by a standard form document. When you receive advice from a solicitor about a Compromise Agreement you have the benefit of their experience and advice as well as the comfort that should they get it wrong they carry professional indemnity insurance.

If you have an Employment Law question or concern which is not related to a compromise agreement please contact us for a fixed fee legal consultation and we will be pleased to provide you with our expert guidance.

Compromise Agreement Advice by Silverman Sherliker, Solicitors.

Regulated by the Solicitors Regulation Authority