Could someone please explain compromise agreements to me?

[sweetheart]

Please can someone give me a run down of how compromise agreements work? I think I understand the principals but may need to ask some more specific questions.

They are usually offered when a job is coming to an end and things have not been going well. Eg the employee may potentially have a claim for unfair dismissal, and while the employer would deny this, they don't want to take the risk of ending up in the Employment Tribunal.

So they will say, We don't believe you have a case, but will pay you £x (tax free ordinarily up to £30k) if you sign a CA which basically prevents you from suing them. You will have to get your own legal advice and usually that is paid for by the employer up to a set limit.

Sometimes very risk averse employers offer them when there is no real need, or where they are slightly concerned that they may not have followed a procedure correctly - eg redundancy.

Hope this helps. Please do ask if you have more questions.

By the way, I was an in house counsel advising on CAs occasionally, and also engineered one when I left my last job - my boss had been a total nightmare and made by job untenable. In my case, I resigned saying I had no other option and claimed constructive dismissal.

say as an example some one was givena CA in a meeting to end their employment, if they were asked to sign it there and then would it be legally binding? Or would it be considered null and void if the case ever went to tribuneral?

You would have to take it away and get independent legal advice on it. Otherwise it is not a valid compromise agreement AND you could still go to the ET.

compromise agreement is also a good way to negotiate a higher settlement than under redundancy (assuming, of course, that there is doubt about the redundancy and you could go to a tribunal).

ONly one thing to add. I'd sgn it in front of them, then wait for the money to be transferred into your account. THEN go to the ET.....that way you have something to live on once your income stops.

Littlebit - the point of a CA is that you can't take the employers to an ET. You are signing away statutory rights in exchange for something else (usually financial compensation). This is the reason you have to get independent advice before you signit, or it's not binding.

OP - they are usually a relatively quick and easy way of dealing with a contentious employment issue. Certainly preferable to the employment tribunal route, and because you have to get advice, it would be very unusual to get an unfair settlement.

Hermione - I think littlebit means that, if you are asked to sign it there and then without legal advice, you could do what she suggests.

Personally I wouldn't. If you go to tribunal, your compromise agreement money will generally be deducted from any award. But you will have a very pissed off ex-employer who will likely make the litigation very difficult for you, very stressful and (if using a lawyer yourself who isn't covered by insurance or no-win no-fee) very expensive. You're better off just negotiating a deal you are happy with at the outset. Also, although not effective for statutory claims, you can arguably waive certain contractual rights in the type of agreement you refer to OP (things like bonus entitlement or notice pay potentially and dependant on the circumstances). So you could sign away something valuable whilst thinking you were 'safe'. I just wouldn't go that road if I were you.

Oh, and another thing, if you negotiate a CA you can add in lots of useful things, like references and outplacement that probably aren't in the first draft and don't get awarded by tribunals, so you might lose out on 'stuff' anyway.

If put under pressure to sign, I would just be very clear that you aren't happy doing it on the spot, need time to think and that you thought you needed to see a lawyer for the whole agreement to work (assuming you think that they are fully aware of the last bit and just trying it on).

On the tax fedup is right, but the rules can get complicated, particularly as to whether payment for notice periods you don't work is taxed or not.