Compromise agreements are discussed a lot in employment law and are a useful and final tool when dealing with employees that have been dismissed or are being litigious.
A compromise agreement is a legally binding agreement, between employer and employee which accompanies a lump sum (or sometimes instalments) of money to the employee that, once exchanged, means the employee will have no further recourse upon the employer.
The amount of money which comes with each agreement is individual and is normally negotiated between the parties. Sometimes the agreement is offered with a first and final amount which is not up for negotiation. Each instance is different and can be affected by such factors as; age of employee; length of service; any discrimination or foul play displayed by either side; procedural discrepancies on the side of the employer; salary and/or contractual obligations.
Compromise agreements are becoming more popular due to their finality and the binding nature that not only restrict the employee bringing a future claim on any grounds, but also the silence that they bring. A compromise agreement, once signed by both parties, denies the ex-employee the right to discuss the fact that it even existed, let alone disclose the amount received. This then leaves the employer safe in the knowledge that the potentially disgruntled ex-employee will not be able to besmirch the reputation of the employer.
A compromise agreement is only valid once it has been signed by both parties, and the employee has had independent legal advice to ensure that he is happy with its contents. On the whole, the independent legal advice will be paid for by the employer in the form of a clause within the agreement offering to pay for legal fees up to 'X' amount. A ball park figure of £300 + VAT is normal.
In reality there is very little difference between compromise agreements, but there may be clauses that need to be specific to each employer in respect of their market place. When considering a compromise agreement as a means to sever employment it is worth considering what a standard agreement consists of, and whether it will serve your purpose. If your market place is highly specialised and a standard agreement includes a clause stopping the employee practising in that arena, you may need to pay them more to accept- or amend the clause.
When ACAS are involved in mediation the agreement is referred to as a COT3 and is the only other alternative to a legally binding agreement that is not actioned through a Tribunal.
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