COMPROMISE AGREEMENT
Employers and employees may resolve their employment disputes by signing a document known as a compromise
agreement (also sometimes referred to as severance agreements or termination agreements). In addition, an
employee may be asked to sign a compromise agreement if they are receiving an ex-gratia payment such as an
enhanced redundancy payment.
The offer from the employer to the employee will usually be stated to be ‘without prejudice’ so as to prevent the terms
of the offer being used as evidence in later proceedings in the event that the employee chooses not to accept the
agreement. By negotiating compromise agreements on this basis, it ensures that the agreement is not binding until it
has been signed.
Requirements
In terms of the Employment Rights Act 1996 employees are not permitted to contract out of their statutory
employment rights except in cases where the following conditions have been met:-
1. The Agreement must be in writing.
2. The Agreement must relate to the particular complaint.
3. The employee must have received independent legal advice from an independent legal adviser as to the terms and
effect of the proposed Agreement.
4. The adviser must be identified in the Agreement.
5. The Agreement must state that all of the above conditions have been satisfied.
Once these conditions have been met and the agreement is signed by the parties, it will have the effect of discharging
the employee’s statutory rights referred to in the agreement. Proceedings which may be compromised include unfair
dismissal proceedings, discrimination claims, claims for breach of contract, unlawful deduction of wages and equal
pay claims. The employee in return for signing away their rights will receive monetary compensation usually within a
specified period, for example, seven or fourteen days.
It is common for compromise agreements to exclude a waiver of personal injury and/or accrued pension rights claims
which enable the employee to be able to make such a