A compromise agreement is an agreement which is legally binding. It is used after the termination of your employment, and normally lays out the details of a severance payment offered by your employer. In return of accepting this payment, you agree not to pursue any claims against your employer using an employment tribunal. The compromise agreement may also lay out the details for a ‘payment in lieu of notice’, which may be applicable to some employees regarding their notice periods.

Compromise agreements have become increasingly popular as employers are using them to prevent any future claims by ex-employers. These compromise agreements therefore seem like an effective way of reducing the number of claims made, and safeguarding against future claims. One of the most popular scenarios they are used in is where employees are made redundant.

Legislation recognises compromise agreements, making them the only way that a claim can be legally binding without beginning a case with an employment tribunal.

In order for the compromise agreement to be binding, it is important that it is first explained by an independent solicitor. They must then sign the document, certifying that they have offered the appropriate advice.

Is it Necessary to Have a Compromise Agreement?

Although it is not necessary for employers to have compromise agreements, it is strongly advisable. This is because it turns the otherwise regular redundancy package into a ‘full and final’ settlement. Redundancy procedures are always quite a sensitive area of employment law, and employers are keen to avoid difficulties spanning from this area.

For example, if an employer made an employee unfairly redundant (e.g. they did not use fair selection criteria, or did not comply with consultation periods) the employee could then begin a case with an employment tribunal claim, even after the redundancy. This may result not only in compensation, but also possibly reinstatement in their old position. Having a compromise agreement would prevent the employee from doing this, as it is with this agreement that the employer ensures the employee has signed away their right to pursue any claims at a later date.

What Terms Are Included in a Compromise Agreement?

The compromise agreement will provide a full breakdown of all the figures you will receive, and to what extent these figures will be payable free of tax. Normally up to £30000 can be paid tax-free, but you will have to provide tax indemnity to your employer. These are relatively normal terms.

The compromise agreement will also probably contain a confidentiality agreement, which will ensure that you keep your employer’s trade secrets and business deals private. Additionally, they will probably request you keep the conditions of the compromise agreement confidential. By agreeing to do this, they may pay you a small lump sum in addition to the rest of your package. The agreement may also state that you cannot make any derogatory statements about your employer.

Another addition to the compromise agreement may be in the form of existing or new post-termination restrictive covenants (for example, you may not be allowed to work for a competitor for 6 months or a year).

Do I Need a Solicitor to Manage a Compromise Agreement?

Because compromise agreements are written in a very legalistic manner, it has become a legal requirement that employees seek independent legal advice for a compromise agreement  before it becomes legally binding. The solicitor will need to sign the agreement as proof that proper advice has been given.

In order to be eligible to sign the agreement, the solicitor must be covered by appropriate indemnity insurance.

Normally it is the employer who pays for the independent solicitor, so you will not have to worry about the cost of legal fees.

Expert Evidence is covered under Part 35 of the Civil Procedure Rules 2010 and parties can either instruct a single joint expert as selected and agreed by both parties, or, failing that, each party may be able (see below) to rely on the evidence of their own expert.

Expert evidence in a civil or a criminal trial is part of the case more often than not. However, the right to use expert evidence is not unfettered and as part of the Court’s case management powers, the Court will restrict expert evidence to that which is:

a)      reasonably required to resolve the proceedings;

b)      whether the use of an Expert is proportional to the case;

c)      whether the use of an Expert furthers the Overriding Objective.

Furthermore, where two or more parties wish to submit expert evidence on a particular issue, the court may direct that the evidence on that issue is to be given by a single joint expert. If the parties cannot agree on a single joint expert, the Court may select the expert from a list prepared or identified by the relevant parties, or the Court can direct that the expert be selected in such other manner as the court thinks fit.

However, if a party wishes to reply upon an Expert report, but fails to disclose it, they may not use the report at the trial or call the expert to give evidence orally unless the court gives permission. This shows that when it comes to court process, complying with timescales is very important.

When an Expert is instructed, the instructing parties must adhere to the Protocol for the Instruction of Experts, to ensure that they consider their duties and that their appointment is valid. This protocol is a sub-set of rules within the overall civil procedure rules, and protocols apply to many different types of claims.

The Expert has a duty to the Court, in that their duty is to help the Court on the matters within the expert’s remit and this duty overrides any obligation to the person from whom those instructions are received.

The form of an Expert’s report must be in writing , unless the Court directs otherwise and the contents of the Expert report must adhere to Rule 35.10 CPR 2010.

 If the Expert’s report does not comply with this Rule, it is unlikely that the Report will be let in, in that format, without the Court’s permission.