| What terms does a UK compromise agreement | | | | 'trade secrets'. Another aspect of this clause is a |
| contain? | | | | prohibition on the former employee from sharing |
| UK compromise agreements are composed from | | | | any information about the company's service |
| a mixture of generic clauses (contained in most | | | | contracts or fellow colleague's employment |
| agreements) and clauses specific to your | | | | contracts with outsiders. |
| employment relationship. Compromise agreements | | | | - A legal claims clause. These will often be detailed |
| in other countries may vary. Here are some | | | | and wide-ranging. The contract will detail a list of all |
| sample provisions that are commonly contained in | | | | potential legal claims that the employee is |
| a compromise agreement: | | | | restricted from bringing against the employer. |
| - An agreement on what type of reference the | | | | Employment tribunals have made it clear that an |
| employer is willing to provide. There is no legal | | | | employer cannot merely state that an employee |
| obligation for an employer to provide a reference | | | | is unable to bring legal action against them, a |
| for an employee; therefore it is important that | | | | clause as generic as this is unenforceable. |
| details are provided in the agreement for any | | | | What is a PILON (Payment in Lieu of Notice)? |
| references that may be requested. Often the | | | | A 'payment in lieu of notice' is a sum of money |
| contract will provide only for the very basic type | | | | paid by an employer to compensate an employee |
| of reference, i.e. employment details and job | | | | for not working the notice period required under |
| description outline and therefore is a negotiation | | | | their contract. These types of payments can be |
| point. | | | | used in cases where the employer does not wish |
| - There may be a restriction in the agreement | | | | the employee to physically be present at work |
| preventing the employee from seeking or starting | | | | for his/her notice period. |
| employment elsewhere, ie within a particular | | | | Legally an employee must be able to earn what |
| sector. If a clause such as this is included then | | | | their contractual earnings would have been if they |
| legal advice should be taken before signing an | | | | had worked the notice period in full, a lesser sum |
| agreement, - an employee could find abiding by | | | | cannot be offered as a PILON. |
| the clause highly restrictive. | | | | What is Garden Leave? |
| - A clause specifying how much compensation the | | | | As mentioned above, an employer may prefer an |
| employee shall receive under the contract. Note; a | | | | employee to physically stay off work, whilst still |
| payment of up to £30,000 can be received | | | | being paid under their employment contract. |
| by the employee tax free (however, if this | | | | Garden leave is an arrangement where the |
| amount is made up from wages and annual leave | | | | employer still pays the employee's salary whilst |
| monies owed, then normal tax and national | | | | keeping them off work. This can apply at any |
| insurance contributions will apply). | | | | time, whereas a PILON is specific to an |
| - A PILON (Payment in Lieu of Notice) clause may | | | | employee's notice period. |
| be included as part of the contract (please see | | | | Employers may choose to keep an employee off |
| below for more information on the definition of a | | | | work for many different reasons, some examples |
| PILON). PILON monies are classed as being | | | | are; logistical reasons such as office space, if the |
| received whilst a person is employed, therefore | | | | employee is particularly troublesome, or lastly the |
| they are liable for the usual tax and national | | | | employee imposes a risk of poaching customers |
| insurance. | | | | or staff members. |
| - It is normally requested that a 'tax indemnity' | | | | An employer is normally only able to enforce |
| clause is provided. The employer therefore does | | | | garden leave if there was a provision providing for |
| not have any liability with regard to paying tax or | | | | this in the original contract of employment. |
| national insurance money owed on payments | | | | Nonetheless, garden leave is often negotiated as |
| made under the agreement. | | | | part of a UK compromise agreement. |
| - A mutual covenant not to make deprecating | | | | Don't forget to ensure that you need independent |
| comments about the opposing party. This works | | | | legal advice on your UK compromise agreement - |
| both ways, providing protection for the employee | | | | otherwise it simply will not be binding. When |
| and employer against potential slanderous remarks | | | | choosing a solicitor to advise you, ensure you |
| against them. | | | | choose employment law solicitors specialising in |
| - A confidentiality clause to ensure that the | | | | compromise agreements. Be aware that this |
| employee does not release any specialist | | | | article applies to UK employment law only - laws |
| information gained from their employment | | | | in other countries may vary. |
| contract to a 3rd party, ie not giving away any | | | | |