Compromise Agreements.

When your employment has concluded or if you have a dispute, it is quite normal for both parties to agree to enter into an agreement that sets out terms and conditions agreed between the two parties, this is called a Compromise Agreement.

The compromise agreement is drawn up by your employer and as part of you agreeing to sign the agreement you must obtain Legal advice, more often than not the employer will pay an agreed sum for this advice.

Once you have signed the agreement you will not be able to take any action against your employer in an employment tribunal, so it's important that all matters such as pay and other entitlements are taken care of.

You do still have rights against your employer for matters such as pensions and personal injury; you also have rights if your employer has breached the agreement.

Payments made under a compromise agreement.

Quite often you will receive a payment agreed by your employer as part of the termination of employment, unpaid wages, holiday entitlement, redundancy pay etc.

You will have to pay tax and NI on any element of your lump sum made up by wages, holiday pay and any other taxable items.

If you receive a lump sum in addition to this for your loss of employment/redundancy the first £30,000 is normally tax free, if you are receiving a payment in lieu of notice you should discuss the tax situation with your legal adviser as this may or may not be taxable depending on your contract.

The agreement will also set out who is responsible for any tax, which is almost always the employee.

Clauses sometimes inserted into a compromise agreement.

Restrictive covenant.

Quite often an employer will include a clause that says 'you cannot work for a competitor within 20 miles for a period of 6 months', or 'you may not work for any of your employer's clients for a period' or 'you cannot poach any staff from your employer'.

For most people the problem is that you want to work and if you have skills in a type of work, you will probably want to continue to work within that field. If the clause tries to restrict you from working it will not be enforceable, however there is a 'but', as with all these things, if the clause is well defined and is reasonable, it could be enforceable, everyone's circumstances are different and it is worth discussing this with your employment solicitor.

Restrictive covenants are sometimes included as a deterrent, but the decision on if a covenant is enforceable will be up to the court to decide and that can cost, so you should be very aware of them and through your discussions, try to get them removed, as you probably already know if there is a possibility of you breaching any clause.

Confidentiality clause.

These are common place in any agreement, it will say that you cannot speak to others about the details of the agreement, so you can say you have one but not what is included, the logic behind this is to stop other employees from finding out about payments etc.

Slander clause.

These clauses will prevent you from talking about your ex-employer in a bad way to others; this is included to protect your employer's reputation mainly with their customers and staff. This clause is often a two way agreement, which will protect your reputation.

References.

We would recommend that you ask for a reference to be incorporated into the compromise agreement, your ex employer should always provide a fair and accurate reference, not to do so would be an offence.

But you may feel better with it included at this stage.

Obtaining the advice from a solicitor; most solicitors will have a fixed cost for acting for you in this respect, some will ask how much your employer is paying, the best advice would be to contact a few firms to ask them about costs and what they include, if you know any of your colleges who have used a solicitor already, ask about their experience.

Most solicitors will consider the agreement and give you written advice, if any amendments are recommended they will negotiate amendments with your employer's solicitors.

Once you have considered the agreement if you have any questions or concerns you should voice these as early as possible to your solicitor.

Once the agreement is acceptable to all parties you will be asked to sign it and it is then sent back for your employer to sign.

If you would like to contact an employment law solicitor that will be able to help with your compromise agreement, use the search facility at the top of the page.