UK Compromise Agreements - What Are Their Effects?

This article looks at the most common questions asked about compromise agreements in the UK - laws regarding compromise agreements in other countries may vary.

When are compromise agreements used?

A compromise agreement can be offered by an employer that is going to breach an employee's rights by terminating their employment contract. It is normally the situation in which an employer accepts that they may loose at an Employment Tribunal when a compromise agreement is offered. Therefore they can be used in cases of discrimination, unfair dismissal, constructive dismissal and redundancy.

Compromise agreements are being used more and more frequently in redundancy cases. Employers have more responsibilities under the law when making people redundant then ever before. Due to this, employers often end up breaching an employee's rights when making them redundant. The compromise agreement is therefore used by an employer to compensate the employee for the breach of contract and it thus stops the employee from being able to make a legal claim against the employer.

Does a compromise agreement prevent me from taking any legal action against my employer?

No. A compromise agreement will only apply to the subject of the original breach. The law makes it very clear that it is not legal for an employee to 'contract out' of his/her employment rights. Therefore if a separate claim against your employer arose you would not be barred from bringing this before an Employment Tribunal, irrelevant of the agreement.

Generally claims that are made after an agreement is signed are as follows:

- A breach of contract claim (regarding the terms of the agreement)

- Personal injury claim (if not excluded by the agreement)

- Claims in relation to accrued pension monies

As mentioned above, if an employer only really signs a compromise agreement when they know they might lose at an Employment Tribunal, why should I not take them to a Tribunal?

Firstly, the employer could want to keep the matter private rather than having to fight it out in a Tribunal. Therefore it is not always the case that the employer knows that they 'might lose'.

Secondly, compromise agreements have significant cost benefits in comparison to taking a claim before a Tribunal. The below huge savings can be made if you opt for a compromise agreement:

- Tribunal fees

- Extensive legal fees

Another reason why there are cost savings is because it is usual practice for the employer to pay for the employee's legal costs when seeking advice regarding a compromise agreement. When taking a claim to an Employment Tribunal however it is normal practice for both parties to pay their own legal costs at the conclusion.

Lastly, a compromise agreement can save you the stress and drama of taking a claim before a Tribunal. It makes sure that the matter remains private and allows for individual needs. Party autonomy means that you remain in control of what is agreed rather than passing this control over to an impartial judge.

What if my employer fails to pay me the agreed compensation, can I enforce the agreement like a Tribunal judgement?

A UK compromise agreement is a legally binding contract. If your employer fails to pay the compensation money in the time agreed, you can sue them for breach of contract to enforce payment. Equally, if you beak away from any of the agreed conditions of the compromise agreement the you to could be sued for a breach of contract.

You should not forget to take separate legal advice in order for the UK compromise agreement to be valid - so make sure you consult specialist compromise agreement solicitors.