Compromise Agreements are becoming increasingly common as businesses shed their employees

John Todd, Litigation Solicitor at AMD Solicitors looks at some pitfalls.

The increasingly popular use of Settlement Agreements – where an employee agrees not to make a claim against their employer in return for a financial settlement – may deprive employees of the best exit deal.

What might appear to be a golden handshake of sorts might not be best for the employee, especially in a slow job market. Four month’s pay might sound like a good offer, but if your notice period is three months, you are really only getting an extra month’s pay to leave quietly. It is essential that employees seek advice about what they are agreeing to. In fact, it is a legal requirement that, before signing such an agreement, employees have received independent advice. Employers will typically pay or contribute towards the legal expenses incurred in receiving the legal advice on the agreement.

In my experience Settlement Agreements are an effective tool in ensuring both employer and employee can resolve an issue fairly. However, the agreements will usually emanate from the employer and employees should not take it as read that it is the best deal on the table.

Seeking the advice of a solicitor once the agreement is offered is essential. Without one, employees could be walking away with a settlement which is far from a compromise. A solicitor can negotiate on an employee’s behalf. Unlike the majority of other advisers, solicitors are best placed to advise employees on such matters. It is what they are trained to do.

Using a solicitor can ensure other factors, such as length of service, can be taken into account in the settlement.

Settlement Agreements typically include clauses that go far beyond the simple compromise of potential tribunal claims in respect of which a solicitor’s advice can be crucial. Examples include covenants in respect of not competing with the employer in the future; the return or retention of the employer’s equipment; the parties not making derogatory remarks against each other; the employee providing assistance to the employer, without remuneration, in the future.

While an employee can reasonably be expected to waive their rights in respect of claims they are currently aware of, such as redundancy payment or notice pay, they should not waive rights in respect of matters that could present themselves in respect of future pensions or personal injury claims.

Solicitors at AMD can advise both employees and employers on Compromise Agreements and all employment law matters. Contact John Todd on 0117 962 1205 or email

This article is provided for general information purposes only and represents our understanding of the relevant law and practice as at the date of uploading. This article should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.

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