30 April 09
In the current economic climate redundancies are becoming more and more common. Both employers and employees are having to go through the compulsory redundancy process and although the procedures have relaxed slightly since April they can still cause problems, particularly for employers. In some cases the employer will be prepared to offer a “deal” to the employee so that the employment relationship can end on agreed terms without the stress caused by having to follow lengthy and sometimes overly formal procedures. However such a deal needs to be embodied in what is known as a Compromise Agreement, which is a specific type of Agreement, created and controlled by statute, designed to end employment relationships.
Essentially the Compromise Agreement will provide for the employee to receive a sum of money as compensation for loss of his or her job and in return the employee will agree not to pursue any further claims against the employer arising out of the employment or its termination.
The benefit for the employer is that they will often receive more than their strict legal entitlement, such as the statutory redundancy payment. The benefit for the employer is that the Agreement represents finality and it removes the risk of an expensive Employment Tribunal claim from the employer following termination of the employment.
A crucial part of the procedure for a Compromise Agreement is that the employee must take independent legal advice from his own Solicitor and the Agreement will contain a certificate from the Advisor that such advice has been given. This is designed to prevent employees being pressured into signing Agreements which are not in their best interests or which do not provide them with adequate compensation for the loss of their job.
Since the taking of legal advice is essential for the Agreement to be valid the employer will invariably make a reasonable contribution to the employee’s legal costs.
If you are facing redundancy or if your employer is talking to you about a Compromise Agreement then we can advise you on your position. Contact Nick Bowers, Partner for further information or advice on any aspect of Employment Law.
