Compromising times make for Compromise Agreements

8 June 2012

Both companies and individuals are trying to rebalance their economic circumstances at the moment and that sometimes involves employers and employees going their separate ways.

An employee/employer relationship is a complex one. Because employees often don’t have as much ‘bargaining power’ when signing their employment contracts, the law implies lots of different rights. At the end of the relationship, employers are often worried that those rights will carry on and may lead to a claim against them.
One solution which can work for both parties in ‘drawing a line’ under the end of an employment is a Compromise Agreement.
In its simplest form a Compromise Agreement is a contractual arrangement. An employer and employee agree to terminate their working relationship, but draw a line under all procedural rules, contractual rights and financial claims in “full and final” settlement.
Essentially the employee is agreeing not to make any future claim against the employer for issues such as unfair dismissal or breach of contract. In return for giving up these claims, he or she will receive a lump sum of cash. A lump sum can include (amongst other things) Pay In Lieu of Notice (PILON) and a redundancy sum (determined by legislation and based on age and length of employment). In some cases, a compensation payment or enhanced redundancy package is offered.
Often both parties will agree that the employment termination be recorded as a redundancy, even if the correct redundancy procedures have been side-stepped by the very signing of the Compromise Agreement.
Usually Compromise Agreements are negotiated directly between the employer and employee and obviously each Compromise Agreement will largely be tailored to each individual case.
However one common thread amongst all Compromise Agreements is that in order for the agreement to be valid there will be a requirement for the employee to seek independent advice from an individual covered by professional indemnity insurance. Often, the employer will even pay for all or part of the fees of the solicitor the employee consults. That is why our clients often have nothing to pay towards our fees.
It is important that you get a solicitor to check the terms of the Compromise Agreement – especially since it is often drafted by an employer’s solicitor and presented to the employee for signing. For example, there are certain rights that cannot or should not be contracted out of (such as accrued pension rights or certain personal injury cases), and there are also provisions about tax-free sums and the possibility of a future reference that need to be thought about. There will also be clauses about the return of property, confidentiality and derogatory comments. There may also be provisions restricting you from working for certain other employers (such as a competitor). Such a restriction may have already been in your employment contract or it may have been introduced by the Compromise Agreement for the first time.
Therefore, it is essential that the terms of the Compromise Agreement are checked and that you get legal advice (we often have to get employers to change the terms). Independent advice is so important, that it is a legal requirement that you have obtained such advice. The solicitor has to sign the Agreement to say that the advice has been given.
If you have negotiated a Compromise Agreement with your employer, including the sum to be paid out, and now require an independent legal advisor to check or to facilitate the signing of your Compromise Agreement, then get in touch with Inksters.
Our litigation solicitor Gus Macaulay is experienced in dealing with Compromise Agreements and has received an increasing number of referrals recently. Often, the Agreements are turned around by Gus in a matter of days and the employee receives the money due shortly thereafter.
Gus understands that during times of upheaval and leaving a place of employment, there is a need for clear and efficient assistance to help draw a line under the past, and ensure everything owed to you is released as soon as possible.
Please give Gus a call on 0141 229 0880 or email Gus by clicking here, and he will swiftly help you to move forward.

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