COMPROMISE AGREEMENTS - WHAT ARE THEY?

During my maternity leave I was made redundant. I told my employer that they could not do this and I was going to get some legal advice. My employer then suggested that we entered into a settlement and that I signed a Compromise Agreement. I would like to settle this matter without further action but do not understand what a Compromise Agreements means.

You are quite right in your understanding that a woman on maternity leave has certain protections against dismissal and being made redundant. More full legal advice and consideration of your particular situation would be advisable. Your specific query to me relates to Compromise Agreements and that will be the focus of my reply.

There are three main ways to settle a claim involving an employer and employee:

  • by making a complaint to an Employment Tribunal (ET)

  • using ACAS conciliation; or

  • by private settlement with the terms formalised within a Compromise Agreements (CAg)

A CAg is a very effective avenue to create a binding settlement where an employee has a valid claim against their employer for a statutory or contractual breach. Entering into such an agreements involves considerably less time, costs and energy than going to the ET.

A CAg will set out clearly the terms of the employer/ employee settlement. In particular it will include a clause to prevent the issue or continuance of proceedings under one of the applicable statutes. This will create the desired effect of a clean break between the two parties. A CAg can only settle disputes that have actually occurred and can be used to compromise more than one complaint, provided it makes clear each of the complaints being compromised and the relevant statutory provisions relating to each.

A CAg will be binding if the following requirements are satisfied:

  • the agreements must be in writing

  • it must relate to the particular complaint

  • the complainant must have received advice from a ‘relevant independent adviser’ as to the terms and the effect of the proposed agreements. In particular its effect on his/her ability to pursue his/her rights before an ET.

  • this adviser must have in place a relevant contract of insurance or a professional indemnity in case the advice was found to be negligent

  • the agreements must identify the adviser; and

  • the agreements must state that the conditions regulating CAgs are satisfied.

‘Relevant independent advisers’ who may act in compromise agreements are:

  • qualified lawyers i.e. either a solicitor holding a practising certificate or a barrister in practice or employed to give legal advice. They cannot be the employer or be employed by or acting on a matter for the employer

  • officers, officials, employees or members of an independent trade union who must not be the employer or an associated employer; or

  • employees or volunteer workers at advice centres providing free advice

It is the legal advisers duty to review the CAg and ensure that it offers the employee appropriate legal protection and that the settlement figure adequately reflects the losses being suffered. The legal adviser will also explain that to sign the CAg will prevent the employee bringing any further action regarding the current matter.

Usually in negotiations between employer and employee it will become clear that to reach a settlement would be in the parties best interest. It is most likely that the employer will suggest entering into a CAg but there are no means by which an employee can force the employer to enter into a CAg of they are unwilling.

Usually the employer will agree to pay the reasonable legal costs incurred by the employee in the review of the CAg. However, sometimes they will only pay a contribution and the employee is left in a difficult position. The employer cannot be compelled to pay any of the legal costs. However, for the employer not contribute will be creating a further loss for the employee to shoulder in a situation where they are not in the wrong. It may be that the employee has the benefit of a legal expenses insurance policy. These are usually attached to the home contents insurance and cover may allow provide support for the legal costs incurred.

You mention that your employer is suggesting a CAg be signed , my advice would be

  • to discuss his agreements to pay the legal costs that you will incur

  • to request that they provide a first draft for the legal representative to review and

  • to appoint an independent adviser who will check that you are being compensated adequately for your losses and that the other terms within the CAg protect you fully. I would also recommend that you agree the wording of the reference that the employer will give upon future employer’s application and this should be attached as a schedule to the agreements.

Abigail H. Daykin, Solicitor

This article is produced for general information purposes only and full legal advice should be obtained before acting or not acting on the information it contains. If this article has raised issues or questions relating to CAgs or any other employment law matter that you would like to discuss please contact me at Abigail Daykin & Co 01252 719155 or e-mail me on:  advice@abigaildaykin.co.uk .

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