Compromise Agreement legal advice by employment law solicitors

Employment law advice on Compromise Agreements

What is a compromise agreement?

A compromise agreement is a written agreement between you and your employer or former employer. Compromise agreements are often entered into when termination of an employment contract occurs eg redundancy, although they are sometimes also used when employment is ongoing.

The main aim of a compromise agreement is to prevent you from bringing legal claims against your employer relating to your employment and/or its termination. Usually your employer will agree to pay a sum of money in return for giving up these rights.

Should I give up my right to make a claim?

Whether or not the amount offered under a compromise agreement is appropriate for you to give up your right to make legal claims will depend on a number of factors, including:

the circumstances in which the compromise agreement is offered
the amount you earn
if your employment is being terminated how soon you expect to get a similarly paid job
the strength of any claim(s) you may have, and
the time, resources and potential legal costs involved in litigating any claim(s) you may have as an alternative to signing the compromise agreement

What does a standard compromise agreement contain?

Compromise agreements vary from employer to employer, but many will include the following:

A breakdown of the compensation to be paid and how this will be treated for tax purposes, eg a payment made as compensation for loss of employment can be tax free up to £30,000. If making a tax free payment your employer will usually include an indemnity in the compromise agreement so that you assume the risk (if any) of HMRC charging tax on any part of the payment once it has been made
Agreement that the payment is in settlement of all claims arising from your employment and/or its termination and an assurance that you will not pursue legal claims against your employer in the future
Assurances or promises given by you and sometimes also by your employer about keeping the compromise agreement confidential and not making disparaging remarks about the other party
Other assurances or promises given by you, eg to keep your employer’s trade secrets and business affairs information confidential or restrictions on your activities after the termination of your employment, and
An agreed reference, usually only factual, which will be given to prospective employers in response to any reference requests

Independent legal advice

For the compromise agreement to be valid you must receive independent legal advice from an employment law solicitor on its terms and effect on your rights to bring a claim. The legal advisor must sign the compromise agreement to say that this advice has been given. Usually your employer will make a contribution towards the cost of the advice. The lowest contribution is usually £250 plus VAT.

Our charges

Whenever we advise on a compromise agreement we endeavour to keep our charges within the employer’s contribution. Generally our charges will only exceed the employer’s contribution in cases where extensive negotiation or drafting work is needed. If our charges are likely to exceed the contribution we will always discuss and agree this with you before the work is done. Sometimes your employer will be willing to increase its own contribution to cover any excess.

Our service

We provide high quality, clear and user friendly advice
We have the expertise to advise you on all legal issues relevant to your compromise agreement, your employment generally and any claim(s) you may have
Our expertise and reputation for employment litigation mean that we can negotiate robustly with your employer if needed or even litigate a case for you if an acceptable agreement cannot be reached
Although compromise agreement advice is often given in a face to face meeting it can be done over the phone, meaning that wherever you live you can instruct us without having to travel

What do I need to do now?

If you would like us to advise you on a compromise agreement please contact our employment law team now on 0844 858 3800.

Disclaimer: No information on this website shall be construed as legal advice and information is offered for information purposes only. You should always seek advice from an appropriately qualified solicitor on any specific legal enquiry.

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