Compromise agreements are a very effective way of ensuring certainty and reducing risk. In effect the employee agrees to receive a specified sum of money and in return he/she agrees not to pursue any claims against you.
Increasingly, compromise agreements are being challenged at the Courts. Long gone are the days where employers could use the same agreement for each dispute. The Courts are more willing to ensure that the agreement settles the actual dispute in issue - a generic agreement runs the risk of being held unenforceable.
It is also important to note that for a compromise agreement to have effect it needs to satisfy the various requirements of relevant acts it purports to compromise. If care is not taken in its drafting it may be that the employee can still pursue certain claims - such as claims for discrimination under the Equality Act 2010.
Many employers/advisers forget the practicalities (and risks) of offering a compromise agreement to an employee. Should it be offered at the outset? This runs the risk of pre-determining any potential future disciplinary/capability action. However, leaving it later increases uncertainly and can lead to other potential causes of action. The simple fact is that each case needs to be considered on its own merits having reviewed the risks involved. Advice should be sought prior to proposing a compromise agreement to an employee.
A well drafted compromise agreement can help to protect your business. You can reinforce or create clauses relating to confidentiality and/or restrictive covenants and make them a term of the compromise agreement. This may assist in preventing senior employees from taking your clients and staff, and protect sensitive business information.
We are experienced in drafting compromise agreements on the behalf of employers and have done so in many differing scenarios. We ensure that the agreement is fit for its purpose and that you do not prejudiced any potential future action when approaching the employee with the agreement. We can assist you in achieving the desired result for your business.