Lawyers Leicester

Compromise Agreement FAQs

What is a compromise agreement?

Employers can offer a compromise agreement where they have to dismiss an employee and there is a high likelihood that the employee has a claim that can be pursued at en employment tribunal.  Compromise agreements are generally offered where:

• Employees are made redundant

• An employee does not wish to return to work after maternity leave

• An employee is declared medically unfit to work

• An employee leaves due to some underlying disagreement or grievance

The essence of a compromise agreement is compromise.  You, as the employer, pay the employee a certain sum of money and in return, the employee waives his right to pursue an employment tribunal claim.

What factors should I consider when offering a compromise agreement?

You should consider:

• The strength of the employee’s tribunal claim – if it appears unlikely that the employee will win his claim, then it may not be necessary to offer the agreement.

• Whether the employee would ordinarily qualify for statutory compensation.

• The kind of package that employees in the circumstances would be offered – obviously, it makes sense to consult a solicitor on this.

• Your statutory duties to the employee.  For example, the employee must have been independently advised on the legal effect of the agreement.

Why do employees have to be independently advised on the legal effect of the agreement?

If the employee does not receive independent legal advice on the agreement, it will not be legally valid.  The employer is considered to be in a stronger bargaining position than the employee, making legal advice an absolute necessity.

Who can act as an independent adviser?

The important point is they are independent and free from the influence of your business.  This can include:

• Solicitors

• Citizen Advice Bureau advisers

• Trade Union advisers

Do I have to pay for my employee’s legal costs?

Whilst there is no strict legal obligation to pay your employee’s legal costs, in our experience about 90% of employers do.  The fees can be from around £200 to £600.

Can I make the employee keep the compromise agreement secret?

Whilst you cannot force the employee to keep the agreement secret, you can have the employee sign a confidentiality agreement to keep the existence of the agreement itself or just its contents