Compromise Agreements

A compromise agreement is a legal undertaking that is issued by an employer, as part of an individual's employment being terminated. These will often include an amount of money (severance pay), alongside notice pay (payment in lieu) which is given with an adjacent agreement for the employee to drop any claims that they may have had at an employment tribunal. These have become a common way of giving closure to a company in the event of multiple redundancies, particularly following the economic downturn of late 2008 onwards, and are also used for senior level terminations.

These agreements are a useful way for both employers and employees to avoid the cost, time and possible embarrassment of attending public tribunal hearings, and such agreements offer statutory recognition, as long as all procedures are followed. Among these is that appropriate legal advice has been given, meaning that both parties should instruct a solicitor to advice them and 'sign off' the agreement. Compromise agreements will often refer to a number of pieces of employment legislation and can be drafted in technical legal language, meaning both parties will typically benefit from legal advice at all stages. It is common practice that an employer will pay for the legal cost of both parties, although an employee is allowed to obtain additional advice to ensure the agreement is sufficiently in their favour, if they wish. A compromise agreement will commonly contain further clauses, which relate to disclosure of trade secrets, comments made about the company after the agreement and the prohibition of the employee bringing any further claims against the company.