| Compromise agreement may be a complex | | | | shoulder all costs of an employee's hiring of an |
| subject for employers but it is very necessary. | | | | independent employment solicitor. The law |
| Experts assert that the deal could be a lifeline in | | | | requires an employee to take a third-party legal |
| instances when the employer may face a | | | | advice from an employment specialist. The cost |
| dilemma over terminating an employment abruptly | | | | usually ranges from about £150 to £500. |
| for inevitable and unforeseen reasons. The | | | | However, it may be costlier than that, depending |
| document could also be important in helping a | | | | on the pricing of the solicitor's services. The |
| business avoid any possible legal hurdle or claim | | | | employer must not force the employee to hire a |
| that an employer may file in the future. The | | | | solicitor but he could provide a friendly guidance |
| compromise agreement must be based on | | | | through providing lists of employment lawyers in |
| current UK legislation as well as best practice. | | | | the locality. It is always up to the employee to |
| The first thing any employer should do when | | | | decide which law specialist to hire. |
| considering embarking on a significant change in | | | | There are specific and necessary clauses that are |
| business landscape is to consult a competent and | | | | usually included in a compromise agreement. |
| highly experienced employment lawyer. A | | | | These clauses are often categorized under these |
| compromise agreement is a legal device backed | | | | headings: termination of employment, definition of |
| by the employment law for providing a cleaner | | | | terms, accrued benefits and salaries, secrecy and |
| break between a departing employee and his | | | | confidentiality, expenses, retention/ return of any |
| employer. The main objective is to settle several | | | | company property, restrictive covenants, final and |
| or all claims that may arise out of the | | | | full settlement, and legal fees. In some cases, |
| employment and its termination. The mutually | | | | these clauses are added: share options, agreed |
| agreed document states a severance pay by the | | | | references, outplacement support, and resignation |
| employer. This payout is in exchange for the | | | | of directorship. |
| employee's agreement not to pursue any possible | | | | The employer must compensate for the loss of |
| claim before an employment tribunal or a court | | | | employment despite dealing with a loss of office. |
| against the employer in the future. | | | | This is particularly true when any director in |
| Often, the compromise agreement is used when | | | | involved. It is a common knowledge that directors |
| there is a redundancy situation or an employee | | | | are rarely remunerated for holding an office or |
| performance issue, wherein there could be a | | | | position in a company. |
| possible risk that the employee may make any | | | | Taxation may be imposed to a compromise |
| claim against his employer. Such a risk may also | | | | agreement term regarding payouts. In general, |
| arise from possible exit issues like | | | | termination payments that are equal to or below |
| post-termination competition. The agreement may | | | | £30,000 are exempt from tax. However, any |
| also be suitable if the employer has less time or | | | | amount in excess would automatically be taxable. |
| has less option to subject the company to risks | | | | The compromise agreement may state who is |
| of going though any full procedure, whether | | | | appropriately liable for tax sums paid over the |
| performance-wise or disciplinary. Basically, the | | | | amount limit. |
| document could help avoid any other form of | | | | Most employers use a standard formula when |
| potential litigation in the future. | | | | computing for redundancy payments as stated in |
| Preventing future legal proceedings | | | | a compromise agreement. These payouts usually |
| An employer needs to uphold and offer a | | | | take into account the employee's salary, length of |
| compromise agreement if he mistakenly raised to | | | | service to the employer, and age. Thus, experts |
| the employee the possibility of any 'agreed | | | | advise to individualize each compromise |
| departure' too early. Such an action may suggest | | | | agreement as much as possible. |
| the weakness of the employer's case; it also has | | | | Support and enforceability |
| limited merit and may possibly undermine an | | | | An outplacement support may be included in a |
| employer's case in subsequent legal proceedings in | | | | compromise agreement. There are clear benefits |
| the future. A badly handled approach may also | | | | to both the employer and the employee. Larger |
| justify an employee's claim of unfair dismissal. The | | | | businesses offer outplacement to employees. The |
| employer should realize that it is not anymore | | | | employer has the right to consider including the |
| safe and advisable to meet an employee 'for a | | | | support to any compromise agreement. Details |
| quiet word' in private. | | | | should be discussed with the employee prior to |
| Is a compromise agreement used only when a | | | | completion of any deal. There may be |
| senior employee is involved? Certainly, such a | | | | recommendations from an employee's solicitor |
| document would be particularly significant if a | | | | regarding provisions on outplacement support in |
| senior employee is being terminated. The priority | | | | an agreement. |
| in such a case is to facilitate reassurance for both | | | | Do not be surprised that compromise agreements |
| parties. However, because junior employees could | | | | are usually being challenged for their enforceability. |
| also possibly expose an employer to legal risks | | | | Thus, the documents may turn more technical in |
| (like possible discrimination on gender, age, race, | | | | nature. An agreement may be used for |
| and disability), compromise agreements are also | | | | implementing an outright dismissal of an employee |
| recommended for them. In general, a | | | | or for abruptly changing terms and conditions of a |
| compromise agreement may be used for all | | | | contract. The former may be tied to a new |
| employees. | | | | employment or service contract signed at the |
| However, a compromise agreement should not | | | | same time. |
| serve as a substitute for proper following of | | | | Great and proper care should be taken when |
| procedures in dealing with dismissal or disciplinary | | | | wording the compromise agreement. This is to |
| issues. The document should not be treated as a | | | | prevent any subsequent claim that may be due |
| mere 'cheque book management.' On the other | | | | to possible amendments in legislation. Thus, |
| hand, a compromise agreement may also be used | | | | experts always recommend to employers proper |
| for resolving other employment issues, including a | | | | consultation with employment law specialists, who |
| possible dispute between the employer and the | | | | could appropriately and more effectively deal with |
| employee. | | | | all the intricacies and technicalities of any |
| Redundancy situations | | | | compromise agreement. |
| In redundancy situations, the compromise | | | | The Human Resources department should always |
| agreement is used by employers to prevent | | | | make sure that it is properly updated with any |
| employees from possibly appealing to an | | | | latest legislation or changes to current |
| employment tribunal following the job loss. | | | | employment laws that may affect compromise |
| Employers need to make sure that if they are | | | | agreements. The Personnel department should |
| paying employees above the limits, there should | | | | make sure the company has proper and |
| be a document that would outline the agreement | | | | adequate legal guidance so that there would |
| and prevent the employees from potentially | | | | always be protection against time-consuming and |
| pursuing claims against the employers in any point | | | | expensive litigation. |
| in the future. An employer who does not strictly | | | | The garden leave |
| comply with current employment laws on making | | | | The employer also has the option to serve a |
| redundancies should offer a compromise | | | | garden leave to the employee as part of an |
| agreement to prevent any claim or case of unfair | | | | employment contract or a compromise |
| dismissal, which would be costlier in the end and | | | | agreement. The term is describing any situation |
| much more tedious to deal with. | | | | wherein an employee is asked or required to |
| Thus, the compromise agreement is the only | | | | serve a period of notice outside the office, |
| effective measure to make any employee resist | | | | probably at home or in his garden, thus the |
| complaining before the employment tribunal after | | | | phrase. During the entire period of notice, the |
| a redundancy. The exit package that comes with | | | | employee would continue to receive every salary |
| the redundancy could be instantly turned into a | | | | and benefit provided as a regular employee. |
| final and full settlement of any possible claim the | | | | However, the same employee is still prohibited |
| employee may have against the employer. It is | | | | from taking another employment from any new |
| possible only through a compromise agreement. | | | | potential employer until the entire garden leave |
| A compromise agreement would usually ensure | | | | period has expired. |
| than there would be no further action to be taken | | | | Employers should be very careful when |
| by an employee against the termination of | | | | terminating employments. They should also be |
| employment. However, in rare and special cases, | | | | cautious when drafting a compromise agreement |
| it may still be possible that a claim is filed against | | | | to make sure the document would cover every |
| the employer. Therefore, a well-termed and | | | | aspect of the employment termination. There |
| executed document must cover every aspect | | | | may be other provisions to be included like |
| that may be relevant when added to normal | | | | non-compete clauses and restrictive covenants. In |
| contractual issues of payment, benefits, notice | | | | any way, the employer must be prepared to |
| periods, cars, bonuses, tax liabilities, and others. It | | | | spend a considerable amount of money. The |
| is important that agreement be properly drafted. | | | | employee must be offered with hefty and |
| Costs and clauses | | | | attractive exit packages for him to sign any |
| Any employer should be aware that he should | | | | compromise agreement offered by the employer. |