DAVID ROYDEN - EMPLOYMENT SOLICITOR
UK EMPLOYMENT LAW

David Royden is a Partner with Laytons Solicitors and Head of Employment Law, Manchester, UK

Laytons Solicitors is a national law practice specialising in all aspects of Company and Commercial Law

Laytons Solicitors, 22 St John Street, Manchester M3 4EB.
Tel: +44 (0) 161 834 2100
Fax: +44 (0) 161 834 6862

Offices at London, Manchester and Guildford, UK

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COMPROMISE AGREEMENTS

We spend most of our waking day at work. For employers it should be a place where staff work well and produce results. A committed motivated team is an important asset and individuals who, for whatever reason, are seen as undermining that asset are invariably seen by the employer as a threat that can be done without. Yet contrary to the perceptions of some employers the expectations of employees for the workplace are usually no different. Most staff want to feel committed and motivated in their work, and place a personal value on the results which they produce.

Breakdown

However from time to time things breakdown. Often it is not the obvious fault of either the employer or the employee, it is just a natural consequence of people spending so much of their time in the same company as each other. When a serious dispute does arise at work it inevitably results in the employer and employee parting company acrimoniously and potentially the dispute ends in the Employment Tribunal. Either the employer will dismiss the employee, or the employee will claim that the treatment they have received has fundamentally broken down the employment relationship. As a consequence the employee may resign and claim that they have been “constructively dismissed”. Given that the compensation limit for unfair dismissal is now well in excess of £50,000, it is the employer who usually has the risk and stands to lose the most by allowing the matter to escalate this far.

If a matter does proceed to a Tribunal the employer will not only have to show that they have dismissed for a permitted reason – usually one of misconduct, performance, or redundancy – but also that they followed a fair procedure in line with the minimum statutory requirements. If the dismissal is for misconduct, then the employer will need to have followed a disciplinary procedure involving various levels of warning save in cases of gross misconduct. If the dismissal is for poor performance then the employer will be expected to demonstrate that they have indicated what the problem is and that they have tried to resolve the problem by allowing the employee sufficient opportunity to improve. If the dismissal is for redundancy then the employer will need to identify the fair basis upon which the employee has been selected for redundancy and that appropriate consultation had taken place.

All these procedures take time – in some cases months – and expense. However it is invariably the case that employers want the matter resolved immediately. Yet very often employees feel the same way but understandably are not prepared just to leave. Following the required procedures in these circumstances is usually not only unhelpful but can often exacerbate the situation.

Compromise

There is a solution. Employers and employees who would prefer to resolve a matter without proceeding to a Tribunal but recognise that the employment relationship has come or is coming to an end can enter into a Compromise Agreement. This usually saves time and costs for both parties. The employer is not required to follow the relevant procedures and, even where those procedures have been followed, is not still faced with the prospect of a Tribunal claim. The employee receives an agreed sum of money under the agreement, which can often be paid tax free, in return for agreeing not to bring a claim. The employee may also be able to agree the wording for a reference, and does not face the prospect of waiting months for a Tribunal hearing or paying solicitors at a time when they may be out of work and can ill afford to.

Legalities

Of course it’s not that simple. Presenting an employee with a Compromise Agreement may in itself constitute a Constructive Dismissal so derisory settlement offers contained in Compromise Agreements may well do an employer more harm than good if the employee rejects the offer and proceeds to an Employment Tribunal. The parties must agree on the terms of settlement which may involve some negotiation on both sides. To be valid there are certain specific legalities relating to the format of the agreement. Accordingly most employers will have the agreement drawn up by an employment lawyer. The agreement must be in writing, and must specify the particular complaint which the employee is agreeing to compromise. The employee must have received independent advice from a person qualified and insured to give that advice (invariably their own appointed solicitor) as to the terms and effect of the proposed agreement. The agreement must identify who the adviser is and it is usual for the employer to pay some or all of the costs involved in taking this advice. Finally the agreement must state that the conditions regulating compromise agreements are satisfied.

Conclusion

Legalities aside, Compromise Agreements are an effective way of resolving a variety of employment disputes and provide an effective and viable method of avoiding legal proceedings and the consequential time costs and monetary expense for both parties.

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Employment Law Procedures - view section

Tribunal Claims - view section

Sample Documents - view section