Greenwich Solicitors

Greenwich Compromise Agreement FAQs for Businesses

What is a compromise agreement ?

A compromise agreement is a form of termination of contract by consent between an employee and an employer.  In exchange for waiving actual or potential legal claims against the employer, the employer pays the employee compensation in addition to contractual entitlements. Compromise agreements are used in many circumstances, including where an employee has a potentially strong legal claim against the employer but also sometimes as a form of enhanced redundancy.

What are the benefits of using a compromise agreement ?

Compromise agreements create certainty and finality. The employer can move on with the knowledge that the employee will not bring a legal case against them, which can prove to be costly (particularly in the case of employment tribunals where the employer will be responsible for paying their own legal costs irrespective of whether they win).  The agreement creates finality for the employee in the sense that they are allowed to seek new work immediately, free of obligations from their previous employer (although you can place the employee on gardening leave if this was agreed to in the original employment contract) and with an amount of extra money giving some extra time to find alternative employment or to take a bit of time off.

What are the drawbacks of using a compromise agreement ?

It should be said that in the right circumstances, compromise agreements offer far more benefits that drawbacks.  However, to offer sufficient inducement to the employee, you will generally have to pay compensation over statutory standards where they apply (for redundancies, for example) and some employers worry that if they are known to offer compromise agreements, other employees may see this as an easy option to tactically manoeuvre a situation where they can also get an enhanced termination package.  Whilst there is no strict obligation, it is generally customary to pay for your employee’s legal costs for receiving advice on the agreement.

Should I tell my employee to seek legal advice ?

Yes, it is absolutely mandatory that the employee seeks independent legal advice, which can include advice from solicitors, registered trade union officials and the Citizen’s Advice Bureau.

Should I use a compromise agreement ?

Compromise agreements are a means to an end and each case should be taken on iot’s own merits. Reasons can include assessing the cost of going through the process of termination over weeks or months, the effect of having an unhappy member of staff on morale generally, for employees who do not want to return to work after taking maternity leave or for employees who have grievances or ill health.

Can ask the employee to waive all possible legal claims against me ?

Strictly speaking, no, although the majority of claims will be waived.  You cannot ask your employee to waive:

• Pension claims
• Personal injury claims for injuries sustained whilst working
• Breach of contract claims for the agreement itself