If you’ve been offered a compromise agreement then one of the principal things you’ll want to know is whether you’re obliged to sign your compromise agreement or not. We’ll address that issue in this post by examining the following elements:
- What is a compromise agreement?
- How do I know whether my compromise agreement is satisfactory?
- Do I have to sign my compromise agreement?
What is a compromise agreement?
A compromise agreement is a contract between an employee (or a worker) and their employer which allows the employee to waive their ability to pursue their statutory and common law rights in the civil courts or an Employment Tribunal (such as their right to claim unfair dismissal or claim constructive dismissal) in return for (normally) the payment of a sum of money or some other contractual benefit (such as, for example, that they’d be allowed to keep their company car). Although employees are not normally allowed to waive their statutory rights there are certain provisions which create a completely legal “loophole” for compromise agreements (to be re-named “settlement agreements” in 2013). In order for a compromise agreement to be legally valid it must be in writing and the employee must have sought advice on their compromise agreement for a relevant independent legal adviser (such as, for example, a solicitor).
How do I know whether my compromise agreement is satisfactory?
This is both an objective and a subjective consideration. In the objective sense, your compromise agreement solicitor will provide you with their expert advice on whether your compromise agreement adequately compensates you for the loss of your rights and, further, whether it is constructed in the best possible manner for you (the most thorny issue is normally the inclusion of new restrictive covenants). However, you will also have your own subjective considerations (as the employee) as to whether the contents of the compromise agreement are satisfactory. This will normally involve an examination of (among other things):
- The value of compensation being offered
- Whether the compromise agreement has been structured so it’s efficient for tax purposes
- Whether you’re being asked to agree to new or extended restrictive covenants
- Whether a reference has been included and whether the reference wording is satisfactory
- What various other clauses have been included relating to confidentiality, the return of property, tax etc
Do I have to sign my compromise agreement?
So, on to whether you should sign the compromise agreement or not. As above, this involves both objective and subjective considerations. You should (we’d naturally say this as we’re compromise agreement solicitors ourselves) listen to the advice of your relevant independent legal adviser in this respect but you must also be satisfied personally that the compromise agreement is right for you. As well as looking at the above elements related to the “structure” of compromise agreements, you must also bear in mind the following issues (again, among other things):
- The potential stress and delay involved in taking on an Employment Tribunal claim
- The “litigation risk” involved with a Tribunal claim (or, indeed, a civil court claim)
- What a reasonable value of compensation is (depending on how your statutory or contractual rights have been breached)
- How much it will cost to conduct an Employment Tribunal claim
London Compromise Agreement Solicitors are compromise agreement solicitors with offices in Richmond and Covent Garden, London.