COMPROMISE AGREEMENT

WHAT IS A COMPROMISE AGREEMENT

Under changes in Employment Legislation during April 2012, it is now lawful (and to a great extent cost effective) to use HR Consultants, such as ourselves, where Compromise Agreement’s need to be finalised.   We are both qualified and insured to provide this service – to both employees and employers.

A compromise Agreement is a ‘Without Prejudice’ and legally drawn up Agreement that both employer and employee sign and enter into as part of an exit strategy.   By stating that it is a ‘Without Prejudice’ document you stating that what follows cannot normally be used against you in court as you do not admit liability for the purposes of any subsequent legal proceedings (See below).  The entire approach tends to be used where an employer wants an employee to leave the workplace quickly and under mutually agreed terms and/or where the parties acknowledge that the working relationship has come to an end but neither party wants to go through a risky, costly, lengthy and/or  formal process.

It is a ‘shaking of hands and an amicable, prompt, parting’ of ways.  

WHAT IS WITHOUT PREJUDICE (Legal Definition).

Without Prejudice is a law phrase meaning ‘without abandonment of a claim, privilege or right’ and ‘without implying an admission of liability’.  It is often used when a document or letter is labelled ‘without prejudice’ meaning that what follows cannot be used as evidence in a court case, cannot be taken as the signatory’s last word on the subject matter and cannot be used as a precedent.  Contents of such documents normally cannot be disclosed to the courts but, when a party proposes to settle a dispute ‘out of Court’ it is the genuineness of the effort that determines whether the proposal can be disclosed or not and not whether the words without prejudice were used.  When a court case is dismissed, or a court order is issued ‘without prejudice’ it means that a new case may be brought or a new order issued on the same basis as the dismissed case or the original order.

A WITHOUT PREJUDICE COMPROMISE AGREEMENT

A Without Prejudice Compromise Agreement is often drawn up where there has been a dispute between the employee & employer and/or as part of a redundancy process.   Senior Directors within organisations tend to adopt this approach where there are simply clashes of opinion in the Board Room regarding the future of the organisation, or where there a conflict of interest has arrisen and the parties agree to part company amicably.  

It is a lawful and common-sense approach to parting company  professionally and with no malice, within the business world.

First, the employee (or their representative) wishing to leave the organisation  may be invited into an “off the record” discussion at which an employer may raise the prospect of a compromise agreement or severance agreement.  To make this approach attractive to the employee, the employer is often willing to pay a sum over and above the minimum payment (ie: statutory notice pay), to ensure that an employee is motivated to leave employment quickly. quietly and under the mutually agreed terms. 

Once an agreement is reached, in return, the employee agrees that s/he will not bring a future legal claim against the employer (except a claim relating to personal injury or pension) and nor is s/he able to ‘bad mouth’ the employer or bring them to disrepute.  The terms of the settlement are confidential too.  For all these reasons, the tight constraints surrounding the process, is often described as a ‘gagging clause’.  That said, it is an extremely affective and popular means of resolving employment disputes, parting company and moving on professionally – with little or no risk to either the business or the credibility of the parties involved.

The process itself is not always straightforward. More importantly a compromise agreement is not binding unless an employee receives expert advice from, for example, a specialist in employment law.

HOW WE  CAN HELP

At HR & Diversity Management we broker such an approach on behalf of our clients.

Once we have ascertained that both parties are receptive to the approach, we draft the Compromise Agreement for consideration.

We advise both parties on the process and we advise both parties of their legal obligtions  and the Without Prejudice rule.  This includes advising all on the  terms and representing one of the parties in negotiations about the terms, including the financial compensation.  It is most important that the agreement is not only mutually agreeable but that it is  legally binding and will protect both parties.

In summary, we point out both the risks and the beneftis of such an approach.

When matters are finalised, we will draw up the final Compromise Agreement and present it to both parties for signing. 

Prior to finalising matters, we are legally obliged to once more draw our client’s attention to any/all  legal constraints and legal obligations – as set out in the documentation.

We have full indemnity insurance enabling us to carry out this specialist work.

We would be very happy to assist you in this process and have almost 20 years of experience of dealing with compromise agreements.

Call us on 01793 338888 or email admin@hrdiversity.co.uk for further information.