Compromise Agreements are becoming increasingly common as businesses shed their employees

Tony Articles

Tony Moore, Director of AMD Solicitors looks at some pitfalls.

A recession-fuelled increase in the use of Compromise Agreements - where an employee agrees not to make a claim against their employer in return for a financial settlement - may deprive employees of the best exit deal.

With businesses making redundancies in response to the credit crisis the use of Compromise Agreements in relation to redundancies, unfair dismissal or unlawful discrimination is ensuring businesses can avoid future claims by former employees.

However not all agreements offered to out-going employees offer them the best package. It is essential that employees seek advice about what they are agreeing to. In fact it is a legal requirement that before signing such an agreement, employees have received independent advice. Employers will typically pay or contribute towards the legal expenses incurred in receiving the legal advice on the agreement.

In my experience Compromise Agreements are an effective tool in ensuring both employer and employee can resolve an issue fairly. However, the agreements will usually emanate from the employer and employees should not take it as read that it is the best deal on the table.

Seeking the advice of a solicitor once the agreement is offered is essential. Without one, employees could be walking away with a settlement which is far from a compromise. A solicitor can negotiate on an employee’s behalf. Unlike the majority of other advisers, solicitors are best placed to advise employees on such matters. It is what they are trained to do.

What might appear to be a golden handshake of sorts might not be best for the employee, especially in the current job market. Four month’s pay might sound like a good offer, but if your notice period is three months, you are really only getting an extra month’s pay to leave quietly. With many people finding it difficult to find work at the moment, that might not last long.

Using a solicitor can ensure other factors, such as length of service, can be taken into account in the settlement.

Compromise Agreements typically include clauses that go far beyond the simple compromise of potential tribunal claims in respect of which a solicitor’s advice can be crucial. Examples include covenants in respect of not competing with the employer in the future; the return or retention of the employer’s equipment; the parties not making derogatory remarks against each other; the employee providing assistance to the employer, without remuneration, in the future.

While an employee can reasonably be expected to waive their rights in respect of claims they are currently aware of, such as redundancy payment or notice pay, they should not waive rights in respect of matters that could present themselves in respect of future pensions or personal injury claims.

 

Solicitors at AMD can advise both employees and employers on Compromise Agreements and all employment law matters. Contact Tony Moore, Chris Brown, Emma Muir or Rebecca Demetriou on 0117 9738205 or 0117 9235562 or email tonymoore@amdsolicitors.com.

 

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