Compromise agreements

There are two ways to settle employment law disputes before a Hearing.  If proceedings have already been issued, they can be settled using a COT3 Agreement.  This is negotiated between you and your employer with the help of ACAS.  The alternative is to use a Compromise Agreement.

A Compromise Agreement is a legally binding document made between you and your employer to settle all your Employment Law and other claims, usually in return for a sum of money and the termination of your employment.  A Compromise Agreement can be a favourable option for you to avoid the stress, risk and cost of legal proceedings, but of course your employer will have to agree before you can enter into a Compromise Agreement.  It should enable you to achieve a clean break from your employment, potentially with an agreed reference and a sum of money. 

Legal Advice

In order for a Compromise Agreement to be legally binding, you must seek legal advice from a relevant independent advisor, such as one of our Employment Law solicitors at Taylor & Emmet LLP.  Your employer will usually offer a contribution to your legal fees for giving this advice, which generally covers the whole cost of the advice given.  We provide varying levels of advice to employees in relation to Compromise Agreements; we can advise you on whether it is in your best interests to sign up to such an Agreement, discuss with you the potential legal claims you may have, and potentially to negotiate an increase to the amount of money on offer. 

Compromise Agreements are “without prejudice” and “subject to contract”, which means you are generally free to withdraw from the negotiations at any time up to signature without adverse consequences, and retaining the option to bring legal proceedings should you wish to do so.  Any claims for Personal Injury or accrued pension rights are generally not compromised by this type of Agreement and you are free to pursue them in the future depending on the wording of the Compromise Agreement, if it becomes necessary. 

Compromise Agreements must be in writing and relate to a particular complaint (potential or actual) or particular legal proceedings.  Your legal advisor will confirm that a certificate of insurance is in place covering the advice given, and that the other conditions regulating Compromise Agreements have been satisfied. 

Content of the Compromise Agreement

As well as a compensation payment, we can also negotiate for an agreed reference to be attached to the Compromise Agreement, and for a clause to be included  to reduce the possibility that your employer will make any negative statements or comments about you.  We can also request a modification of any restrictive covenants to help you get another job.  If your reputation is important, we can draft an agreed announcement or press release to be made about your departure from the company to be included as part of the Agreement. 

We can further negotiate for any payment up to £30,000 made to you under the Agreement to be made tax free, or to request confirmation from HMRC that an amount above this can be made tax free and if necessary, provide a warranty that you will not be liable for any National Insurance contributions or income tax on the payment in the future. 

If you are worried about an ability to exercise any share options in the future, we can make provisions for this as well.