Compromise Agreement

A Compromise Agreement is a contractual deal struck between the workplace and member of staff that sets out a mutually agreed contract to end the employees contract of employment. This type of agreement is utilised by employers to finish an employment contract in the workplace and to prevent the dangers of the employee starting legal proceedings for unfair dismissal.

A Compromise Agreement enables a termination of an employment relationship where the employee waives their legal rights in exchange for a predetermined compensation sum. It really is common place for this sort of contract to be used immediately prior to or following the end of an employment contract.

A legal necessity in the operation of compromise agreements is that employees are required to obtain independent legal advice concerning the implications of completing a Compromise Agreement. The workplace will typically contribute a specified amount for the fees for the worker taking guidance from an independent solicitor.

The advantages of the parties to the employment contract using a Compromise Agreement are that it provides a high level of clarity for the parties involved. For a company the advantages of using the agreement are clear. The worker waives their rights to take action against the employer for unfair dismissal at a tribunal. The workers legal advisor should clearly explain to the employee the implications of giving up their rights. The employees advisor is required to sign the agreement to show that legal advice has been provided.

There are many dangers for companies terminating a contract without the use of a Compromise Agreement. A company needs to ensure that when ending an employees contract that there are no potential grounds for the employee to pursue a claim against the firm for unfair dismissal. Such claims are not uncommon, and in addition to the potential costs of a tribunal finding in favour of the employee, there are also the legal costs and the large amounts of time that an employer would have to spend defending a claim to consider. If there are any doubts in the employers mind that the contract termination is fully justifiable, then the use of a compromise agreement can be a cost effective solution to ending a contract.

When using a compromise agreement, it is important that an employer has proper legal advice on how to complete the process. The drafting of a comprehensive document that covers all of the potential problem areas is essential. It is common for the agreement to contain restrictive covenants as an extra safeguard for the employer. These covenants can provide a measure of protection on areas such as confidentiality, trade secrets and future employment.

For more information on the use of a compromise agreement visit the Swift Compromise Agreements website.