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
it must relate to the
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.
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
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,
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: firstname.lastname@example.org .