Overview of a Compromise Agreement
Many of you will be generally aware of what is meant by a compromise agreement but there are a number of technical issues relating to compromise agreements that you may be unaware of. This section of London Compromise Agreements sets out an overview of the elements which make up a compromise agreements, which may sometimes also be referred to as a severance agreement or termination agreement.
A compromise agreement is a document containing the terms governing the termination of an employment contract. The main purpose behind these agreements is that in exchange for a financial package the employee will wave their right to be able to bring certain claims against the employer in an Employment Tribunal. It is in essence a "full and final settlement" for any potential claims.
In order to be legally binding a compromise agreement needs to fulfil the following conditions:
- The agreement must be in writing;
- It must relate to a particular complaint(s) within their contemplation;
- The employee must receive independent legal advice;
- The advisor must have in force a professional indemnity policy;
- The agreement must identify the adviser;
- The agreement must state that the conditions relating to compromise agreements have been satisfied.
The agreement will also contain details of the financial package which has been offered or negotiated, as well as other terms governing the end of the employment relationship.
Although the above requirements have to be incorporated into any compromise agreement it is important that a compromise agreement should be negotiated and drafted to fit the specific circumstances. For instance, if the employer is offering the employee a financial package above what is the contractual and statutory minimum, then the employer may wish to introduce new restrictive covenants into the compromise agreement or other provisions to protect their business interests. For an employee being made redundant, they may wish to have certain restrictive covenants removed or shortened in order to get a new job.
Contact either Andre Pungerl or Ruth Neil at Stone Joseph solicitors (020 7854 9098), a specialist boutique employment practice, to advise on how to achieve a compromise agreement best suited to your needs.