Why should I sign a compromise agreement?
A compromise agreement governs the termination of the employment relationship. The main aim of a compromise agreement is that in exchange for a financial package the employee will waive 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.
There are certain requirements that each compromise agreement must satisfy, these are dealt with in Overview of a Compromise Agreement which can be found in the London Compromise Agreements - Law and Practice section.
Aside from these requirements, the compromise agreement will contain details of the financial package offered as well as several other terms governing the end of the employment relationship. When assessing a compromise agreement the first question is typically whether the financial package offered is sufficient to compensate you for compromising certain employment rights?
The financial package typically depends on your length of service, seniority and the generosity of your employer. If you have over two years service you are entitled to statutory redundancy pay. Therefore, the financial package must at least cover this and any contractual notice payments. It should also reflect the fact that by signing the compromise agreement you are waiving your rights to bring certain claims.
To determine whether an appropriate sum has been offered it must be compared to the value of any potential claim that could be brought in the employment tribunal. It is, therefore, important to consider:
- The severity of the breach of your employment rights
- The chances of success at the employment tribunal
- The strength of evidence you have of the employer's wrong doing
- The advantages of taking an early settlement (you will save on the time, stress and expense of pursuing your rights)
- The legal costs or pursuing a claim
- Any adverse influence pursuing such a claim may have on your career
- Has the employer more to lose and what is the likelihood that the employer will settle quickly and at what level?
To be able to properly consider all of the above you need to obtain specialist legal advise as early as possible. However, for a comprehensive overview of employment law please visit http://www.employmentlaw.co.uk/ and www.employmentsolicitors.co.uk.
It is also important to bear in mind that the first £30,000 of the non-contractual component is tax free. In addition, you may already have a job offer that you wish to accept, if so, you may then be on "double pay" for several months upon signing the compromise agreement.
As the above indicates, compromise agreements are complex. As such, you should ensure that you are in a well informed position to be able to assess the pros and cons of the compromise agreement before signing it. Contact either Andre Pungerl or Ruth Neil at Stone Joseph solicitors (020 7854 9098) for advice on what are the most relevant issues for you.