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Compromise Agreement

A Compromise Agreement is a way in which employers and employees can settle a dispute arising under a contract of employment or the termination of the same.

The law prohibits an employer from forcing an employee to sign away their legal rights except where a compromise agreement is used. There are relevant legal requirements for compromise agreement to take effect, namely, the compromise agreement must be in writing; it must relate to a particular complaint (for example an allegation of unfair dismissal); the agreement must be statute complaint; the employee must have received advice from an independent advisor as to the terms and effect of the proposed compromise agreement; the adviser must have professional indemnity insurance; and the compromise agreement must identify and be signed by the adviser.

Chambers are able to settle compromise agreement on behalf of employers or advise as to the same on behalf of employees. The terms of any agreement can also be negotiated including the financial settlement in order to ensure a favourable resolution for both parties. To that end, some Members of Chambers are trained mediators and can draw upon that experience. The advantage of compromise agreement is that terms can be agreed that would simply not be achieved following a trial, for example clause pertaining to confidentiality and references.

Compromise agreement can therefore be an attractive, cost-effective, and commercially viable tool for resolving employment disputes. Moreover, it is common for the employer to pay the reasonable costs for the employee to seek independent advice on the terms of the compromise agreement.

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