Compromise Agreements

A compromise agreement is a legal document, issued by an employer, whereby an employer gives certain undertakings as part of an individual's employment being terminated in exchange for a similar agreement issued by the employee to drop claims they may otherwise have made at an employment tribunal. Over recent years they have become an increasingly popular way of giving closure to a company in the event of multiple redundancies and will often include severance pay, along with payment in lieu.

Compromise agreements can also be used at senior level and are a useful way for both employer and employee to avoid the cost, time and possible damage to a business associated with public tribunal hearings. They also offer statutory recognition, provided all procedures are followed correctly, which includes each party instructing a solicitor to advise on, and sign off the agreement.

Compromise agreements often use technical legal language specific to employment legislation, meaning both parties will typically benefit from legal advice at all stages. Whilst each party will have their own solicitor, it is common for the employer to pay the legal costs of both parties. However, an employee is allowed to obtain additional advice at their own cost to ensure the agreement is sufficiently in their favour.

In addition the agreement will almost certainly contain further clauses to prevent disclosure of trade secrets, future comments made about the company and the employee bringing any further claims.