Losing your job is almost always a stressful and anxious time. Then, to add to the stress, you’ve been told to find a solicitor and get that Compromise Agreement sorted and signed. This article explains what a Compromise Agreement is and why you’ve been given it, why you need to see a solicitor, what the Agreement covers and what steps you should take next.

What is a Compromise Agreement and why have you got one?

In its basic form, a Compromise Agreement is a written agreement which documents your employer’s promise to pay you a sum of money in return for your promise not to make legal claims against them upon the termination of your employment. Whilst it may be the case that you have no realistic chance of pursuing a legal claim against your employer, you may still be required to enter into a Compromise Agreement so that your employer can be sure that there is no risk.
It is quite common for an employer to ask an employee to sign a Compromise Agreement when your dismissal has been initiated by your employer, for example, if you are being made redundant.

What does the Agreement say?

A Compromise Agreement will contain some terms which are for the benefit of the employer and some terms which are for your benefit.
You will be mainly concerned with ensuring that all the terms and/or benefits that you have agreed with your employer are recorded in the Compromise Agreement. This is so that you can rely on the Agreement to enforce these terms upon your employer should a problem later arise. For example, typical terms may include:

• The date on which your employment will end
• Payment of notice pay and whether you will be required to attend work or whether payment for notice will be paid in lieu
• Payment for unused holiday pay or time off in lieu
• Terms or compensation for other benefits such as share options, pensions etc
• Compensation for loss of employment
• Redundancy payment, if applicable
• Tax treatment of payments received
• An agreed reference

The important terms from your employer’s perspective, will be those relating to:

• The claims which you promise to waive
• Any conditions which the payment is subject to, for example, return of company property
• Confidentiality of the terms of your Compromise Agreement

Why do you need to see a solicitor?

In order for a Compromise Agreement to be a valid and enforceable document, it is a legal requirement that the terms and effect of the Agreement are explained to you by an independent legal adviser so that you understand exactly what rights you are agreeing to give up and what you are getting in return. This advice is usually provided by a solicitor.
Your solicitor will ask you about the circumstances which have led to the termination of your employment to understand the nature of any potential legal claims you may have. Your solicitor should then explain what the terms of the Agreement are and the effects that signing it will have.
In most cases, your employer will offer a contribution to the cost of your legal advice on the condition that you sign the Compromise Agreement. If your circumstances are straightforward, your employer’s contribution will usually cover all legal fees that you incur. Usually, arrangements are made for such fees to be settled directly by your employer, so that you are not left out of pocket.

What should you do now?

• Read through the terms of the Agreement and flag any points which you do not understand or which you wish to have explained further
• Gather your relevant employment documents such as your contract of employment, and any correspondence you have had with your employer regarding the termination of your employment
• Contact a solicitor or other qualified person to arrange an appointment to discuss your employment and the Compromise Agreement. It is best not to respond to your employer until you have taken advice.

If you’ve any questions on any of the above, or any other employment law issues, then please contact Nicola Brown at Pure Employment Law who will be able to assist. Otherwise if you wish to make an appointment to discuss a Compromise Agreement then please contact a member of the team on the same number below.
Please note that this article is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.