Compromise Agreements – What Are They?
With the recent economic downturn there have been many thousands of redundancies. Many people who never previously considered redundancy, or what they would need to do if faced with redundancy are now forced to seek professional advice on the matter. Once they do, they will quickly be introduced to the complex concept of the compromise agreement.
Compromise agreements are used when severance is voluntary, vs being mandatory or forced on the worker. As a voluntary agreement, compromise agreements often some kind of inducement or financial compensation for the worker.
When a compromise agreement is entered into, the worker signs a legally binding agreement that they will seek no further redress from their prior employer. That is to claim a compromise agreement is a last, comprehensive settlement.
Therefore it’s especially crucial the worker makes the right calls through the method, especially if there are more factors concerned ( as an example open grievances per discrimination ). Because of the complexity and totality of a compromise agreement employees are required to have a representative across the process.
Solicitors contracted to work on compromise agreements on the behalf of an employee are usually paid for by the employer, so an employee can expect to complete the process cost free.
When a solicitor is appointed on their behalf, it is important that the employee is happy with the individual selected. Normally one would expect that the solicitor would have specialist knowledge of employment law and specific experience of representing clients throughout the compromise agreement process.
There are a number of solicitors offices which specialise in compromise agreements, so it would make sense that the employer would approach these agencies first, as opposed to seeking more generically qualified or experienced solicitors.
Having said that, most compromise agreements should run comparatively smoothly permitting agreement to be reached fast.
The key issue, as one would expect in such circumstances is money, i.e. the amount of compensation / incentive paid to the employee. How difficult this is largely depends on how well the company / employer has prepared for the situation. For example, many companies have processes and policies already in place to deal with the compromise agreement process, as well as experienced human resources specialists.
In such cases there’s regularly a calculator or rate sheet in place which permits the level of payment to be decided based on a staff income and length of service with the company. In such cases agreement can be reached efficiently.
In more complex cases, or when dealing with ill prepared companies, the process can become more focussed on direct negotiation, which requires a higher level expertise on both sites.
Compromise agreements are often offered to older employees first, as these people tend to cost companies more, and, investments in training are likely to deliver a smaller return as they will leave within a shorter period of time.
This can further complicate the process of compromise agreement as, with older employees the issue of pension entitlements becomes more acute. So, older employees have to negotiate not only their lump sum pay out, but also the enhancements for their pension. Clearly these are big decisions for the employee concerned, so again, it is important that the employee is happy with the solicitor appointed.
Once negotiation is complete and terms are agreed, all that remains isf or the agreement to be drafted and signed by both parties.
Once that is done the employee is required to sign the agreement, agreeing that this is the final and only claim they will submit to the company. Once that is done, and the compromise agreement is processed, funds will be transferred to the employee to complete of process.
