Compromise agreements are a popular way of terminating employment. Invariably there are benefits to both parties.
In most cases the main benefit to the employee is money. It is also common for the employee to be given an agreed albeit brief reference. Sometimes there are other benefits too.
Unsurprisingly employers expect something in return. The thing which is always given up by the employee is the right to take the employer to an employment tribunal. It is this which usually tempts the employer to pay the cost of the agreement and this which the employee is ‘compromising’ by entering into the agreement. It is something of a benefit to employees too because the delay, cost and uncertainty of an employment tribunal claim is avoided.
As the years have gone by employers have typically asked more and more from employees in return for a payment. Nowadays a leaving employee amongst other things can expect to be asked to agree to complete confidentiality, to make no derogatory statements about the employer, not to compete with the employer and even not to speak to former colleagues.
You might think that agreements once paid are put in the back of a drawer to be forgotten and this may well be so. But it is dangerous to assume that will always be the case.
Agreements will almost always contain a clause requiring the employee to repay their money if they break any of the promises made in the agreement. Some of the promises might easily be broken by the unwary.
Imagine that you have unexpectedly left RBS after many years loyal service. You meet an acquaintance who says; ‘Hello Fred Goodwin- how come you’re not at the bank any more?’. What do you say? ‘I left by agreement’- that could breach a common requirement to keep the existence of the agreement confidential.
In one case the ex-employee had said ‘I haven’t been sacked’. The judge thought that might have been enough to break the agreement- as it turned out the ex-employee had said far more so no decision needed to be made on that point. That ex-employee ended up getting nothing and having to pay the other side’s costs for trying.
The advice is obvious- when it comes to compromise agreements if you want to keep your money keep your promises too.
For more information on compromise agreements visit www.nwelaw.co.uk/compromise agreements.