FAQs about Compromise Agreements

NORTH LONDON  FAQS ON COMPROMISE AGREEMENTS

Compromise Agreement FAQs for Individuals

Why have I been given a compromise agreement?

You have been offered a compromise agreement because your employment has been terminated and you have a strong prima facie (“on the face of it”) claim against your employer.  Compromise agreements are generally offered where an employee has a claim for unfair dismissal.  General scenarios in which a compromise agreement is offered include:

  • Redundancies
  • For employees who are medically unfit to continue working
  • For employees who wish to leave due to some issue/grievance in the workplace
  • For employees who wish to leave following a spell of maternity/paternity leave

What happens if I accept the agreement?

If you accept the agreement, you will forfeit your rights to pursue most legal claims against your former employer.  This doesn’t include:

  • Pensions claims
  • Personal injury claims
  • Claims for breach of the agreement

In exchange for forfeiting some of your rights, you will be given compensation.

What do I have to do before I accept the agreement?

Before accepting the agreement, you will have to have received independent legal advice.  Advice from a solicitor not connected to your employer, an advice centre worker (such as the Citizen’s Advice Bureau) or a registered trade union official constitutes “independent legal advice”.

Why do I need to get independent legal advice?

This requirement is in place to protect your rights and interests.  Simply speaking, without independent advice, the agreement will not be valid.  If your employer were to breach the agreement, you would not be able to rely on it in court.

If I get advice from a solicitor, will I have to pay?

Generally speaking, no, as your employer will in all likelihood agree to cover your legal costs.

Is the compensation given under a compromise agreement tax free?

Generally, compensation packages up to £30,000 are tax free.

Will I have to work out my notice if I sign a compromise agreement?

Generally speaking no.  Furthermore, you can expect to receive pay for the duration of your notice period.  However, depending on your employment contract, you might be expected to go on gardening leave where you are not allowed to work for someone else for a certain period of time.