A Compromise Agreement or Settlement Agreement is an agreement between an employer and employee
signed either shortly before or following the termination of employment which
essentially extinguishes all claims that an employee may have against an employer
following termination of employment.
For a settlement agreement to be valid it is necessary for an employee to have
taken independent legal advice and for the solicitor advising the employee to sign the
compr agreement confirming such advice.
There are enormous advantages for an employer requesting that his employees sign a
settlement agreement as it effectively ensures that the employer is not subsequently
involved in litigation before an employment tribunal. The benefits becomes even
greater if an employer has not acted entirely lawfully when terminating employment
particularly the case in the context of redundancy.
An employee should always think carefully before agreeing to sign a settlement
agreement and should take advice from a trusted advisor. There are too many
legal advisers that simply sign a settlement agreement without exploring the
background to the termination and discussing with the employee whether it is actually
in the employee’s interests to sign the agreement. An employer will usually make
a contribution towards the costs of the person taking legal advice in respect of
settlement agreements, such contributions usually being in the region of £500.
Before advising an employee on a settlement agreement it is vital that we first
receive a copy of the settlement agreement and understand the factual background
of the termination, so when we meet with you we then discuss not only the terms of
the settlement agreement but also whether changes to the same should be negotiated
or indeed whether the compromise agreement should be signed at all.