compromise agreements

Why do employers use settlement agreements?

The easy answer to that question would be that a settlement agreement gives employers peace of mind that a departing employee isn’t going to sue them, will return their phone and swipe card and not post nasty things on Facebook. A settlement agreement  is a legally binding contract between employer and employee that (usually) sees the employer give the departing employee a sum of money in turn for that person agreeing to give their legal rights in respect of fair dismissal, discrimination and breach of contract.

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What’s in a Settlement Agreement?

iStock_000029970108XSmallIn the run up to Christmas many people find themselves with an unseasonal Christmas present: a Settlement Agreement.

Settlement Agreements used to be called Compromise Agreements until last July, when the Government felt it necessary to revise the name (why?).  Despite the change of name, they do the same thing: allow employer and employee to bury the hatchet (not necessarily in each other’s head of course) and because, if properly conducted, an employer can now approach an employee they feel is not performing and suggest a without prejudice exit, their use ought to be on the increase.

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watch mechanism

I get asked this by prospective clients a lot. The other variation is “How does it work”?  I’m talking of course about the employee who has just been told they (or more correctly) their job is to be made redundant.

The usual scenario is that is an employee will have been told their role is to be made redundant and they are put in the consultation period and sent home. The employee is usually either bemused, angry or, occasionally, rather pleased. They need advice on the procedure that will follow and how they can get on with their lives.  That’s where I can help.

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Settlement Agreements – What’s in a Name?

Guest Blog

Settlement Agreements and pre-termination negotiations (also known as Protected Conversations) are to be introduced this summer.

But if we already have compromise agreements and without prejudice discussions will anything really change?

Many argue settlement agreements will not be used any more than compromise agreements because protected conversations don’t give employers enough protection. In essence, the concern is that employers won’t have confidence in them and so won’t use them (any more than they used compromise agreements).

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What to Look (Out) for in a Compromise Agreement

Compromise Agreements come in various forms; there is no one set format for them and they can contain any particular clauses that the employer wants.  They all seek to do the same thing though, to provide the employer with a waiver of claims  i.e. that the employee will not sue for any issues or complaints arising out of their employment or the termination of that employment. The employee will also usually be required to agree to not make any detrimental statements about the employer, will return company property and will not release any confidential information, all in return for (usually) a compensation payment.

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Compromised Agreement?

I’ve noticed a disturbing tendency recently for some employers to tell redundant employees that they will only contribute to their legal costs incurred by a third party solicitor reviewing the compromise agreement if the employee uses the firm of solicitor nominated by the company.  If the employee wants to go to a solicitor of their own choice they will have to pay all the legal costs associated with the advice they receive, without any contribution from the employer.  Remember that it is a legal requirement that a compromise agreement be reviewed by an independent solicitor in order to make the agreement legally binding.

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Coulson’s Compromise Agreement: So What?

I’ve been away in France for a couple of weeks, hence the silence on this blog.  It’s now time to burn off those calories with some serious typing and what better start than on a story that Robert Peston ran on his BBC blog on the 22nd August (apologies if this is staler than yesterday’s croissant)?  Under a headline “Coulson got hundreds of thousands of pounds from News International”, Mr. Peston reported that Andy Coulson (yes, the one late of News International (NI) and News of the World) received several hundred thousand pounds in respect of

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Just been made redundant? Don’t forget …



If your employment has just ended,  not just for redundancy but for any reason, did you sign a compromise agreement? Perhaps you entered into a COT3 via ACAS to settle the dispute?

If you did there’s a good chance you will have signed up to a clause that says;

“You shall not at any time after the termination of your employment represent yourself as  being interested in or employed by or in any way connected with [name of ex-employer]”

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Compromise Agreements and The Equality Act

Employment Law is a fairly staid and unglamourous area of the law most of the time.  Yes, some of the facts giving rise to disputes can be quite amusing but, in the main, practitioners are bogged down in a mire of statutes, regulations and reported cases. For instance, Laurie Anstis’s blog at Work/Life/Law has just highlighted a major drafting error in s.147(5) (a) of the Equality Act that makes it technically impossible for any solicitor to advise an employee with a compromise agreement settling a claim under the Equality Act.  In Laurie’s words

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Compromise Agreements: what are they?

This is a fairly common question.   Basically a compromise agreement (aka termination or settlement agreement) is a legally binding contract between employer and employee whereby the employee accepts a financial package (usual elements include: compensation for loss of employment, notice monies, outplacement services provision, release of stock etc) in return for agreeing not to sue the employer for breach of contract, or unfair dismissal or for any discrimination related reason. The employee will also commonly agree to keep the agreement itself confidential and to say nothing about the employer’s trade secrets and affairs, amongst other requirements.  In order to be legally binding the employee needs to take independent legal advice on the terms of the agreement from a qualified legal adviser – usually a solicitor.  The employer will usually pay a contribution towards the cost of that advice to encourage the employee to get the advice.

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