What is a Compromise Agreement?
In its simplest form a compromise agreement is an agreement between an employer and an employee in which the employer agrees to pay a sum of money to the employee and in exchange the employee agrees not to bring any claims against the employer.
- the agreement must be in writing,
- the agreement must relate to the particular proceedings,
- the employee or worker must have received advice from a relevant independent adviser as to the terms and effect of the proposed agreement and, in particular, its effect on his ability to pursue his rights before an employment tribunal,
- there must be in force, when the adviser gives the advice, a contract of insurance, or an indemnity provided for members of a profession or professional body, covering the risk of a claim by the employee or worker in respect of loss arising in consequence of the advice,
- the agreement must identify the adviser, and
- the agreement must state that the conditions regulating compromise agreements under this Act are satisfied.
A relevant adviser is normally a solicitor or an authorised trade union representative. It is normally the employer who will pay for a compromise agreement to be drawn up and it is common practice for the employer to pay a contribution towards the employee’s legal advice in relation to the agreement (contributions vary but are normally around £250-£500+VAT).
Compromise agreements most often come about when an employer wants to ‘get rid’ of an employee but does not have a legal reason to dismiss him. For example, Bloggs Limited thinks that Jim is stealing from the till but does not have any evidence and does not want the hassle of investigating and conducting disciplinary procedures. Bloggs might confront Jim about the theft and if he denies it they might say ‘we’ll offer you £5,000 to leave quietly’. A compromise agreement would be drawn up in which Bloggs would pay £5,000 to Jim and Jim would not bring a claim for unfair dismissal.Google+