What Are the Effects of a UK Compromise Agreement?

This article aims to answer some of the most commonly asked questions about compromise agreements in the UK. The laws surrounding compromise agreements in other countries vary so be sure to take advice relevant to where you live.

When are compromise agreements used?

A compromise agreement is often put forward by an employer that is going to breach an employee’s rights by terminating their employment contract. It is normally offered when the employer realises that they may lose an Employment Tribunal. This means that they are frequently used in cases of discrimination, unfair dismissal, constructive dismissal and redundancy.

Compromise agreements are becoming more and more common in redundancy cases as employers have increasing legal responsibilities when dealing with redundancies. This means that it is easy for an employer to breach an employee’s rights by making them redundant. A compromise agreement is consequently used by the employer to compensate the employee for this breach and to prevent them from making a claim against them at the Employment Tribunal.

Does a compromise agreement prevent me from taking any legal action against my employer?

No. It will only apply to the subject of the original breach. The law is very clear that it is illegal for an employee to ‘contract out’ of his/her employment rights. Therefore if a separate claim against your employer arose you would still be able to take it to an Employment Tribunal, irrelevant of the agreement.

Generally claims that are made after an agreement is signed are as follows:

  • A breach of contract claim (regarding the terms of the agreement)
  • Personal injury claim (which is not excluded by the agreement)
  • Claims in relation to accrued pension monies

If an employer only really signs a compromise agreement when they know they might lose at an Employment Tribunal, why should I not take them to a Tribunal?

Firstly, an employer might prefer to keep the matter private rather than fighting the case before an Employment Tribunal. Therefore it is not always the case that the employer knows that they ‘might lose’.

Secondly, compromise agreements are significantly cheaper than taking a claim before a Tribunal. The following savings can be made if such an agreement is signed:

  • Tribunal fees
  • Extensive legal fees

Cost savings are also made for the employee because it is usual practice for the employer to pay both sides’ legal fees for an agreement. When taking a claim to an Employment Tribunal, however, both parties normally have to pay their own legal costs at the conclusion, depending on the outcome of the case.

Finally, a compromise agreement can save you the stress and drama of taking a claim to a Tribunal. It keeps the matter private and allows party autonomy. Party autonomy means that you remain in control of what is agreed rather than passing this control over to an impartial judge.

What if my employer fails to pay me the agreed compensation, can I enforce the agreement like a Tribunal judgement?

A UK compromise agreement is a legally binding contract. If your employer fails to pay the compensation money in the time agreed, you can then sue them for breach of contract to make them pay what you are owed. On the other hand, if you fail to keep to your side of the agreement, you also can be sued for a breach of contract.

Don’t forget that you need to take independent legal advice on a UK compromise agreement for it to be valid – so make sure you consult specialist compromise agreement solicitors.