Compromised Agreement

Compromise Agreements – Valid or Void?

The compromise agreements they currently hand out to departing workers like confetti might well not be accurate, particularly if the employee has not had sufficient independent legal advice.

In this age of mass redundancies, compromise agreements are part of daily life for employers, so having the employee to sign one means that the termination payment is agreed in full and final settlement and the employer will not be sued later. They’re there to protect the employer in this context.

Compromise Agreements

One of the main conditions for a valid settlement arrangement, however, is that an independent attorney obtains proper, independent legal advice from the employee. The Employment Rights Act 1996’s section 203 is very clear. The independent advisor must be defined by the consensus agreement. The employee must have received legal advice from the required independent advisor on the impact of the compromise agreement, and the independent advisor must have an established professional indemnity insurance contract covering the possibility of the employee claiming advice against them. The lawyer must also certify that his company is not working on behalf of the employer. The law is therefore reasonably straightforward and the employee’s solicitor’s independence is a crucial factor in determining if the settlement arrangement is legitimate. Moreover, if that would result in a conflict of interest, no law firm could ever follow orders.

What if the employer ‘recommends’ the attorney to which the employee can go for advice on the settlement arrangement or only offers to cover the legal expenses if that particular company is used by the employee? What if the business receives a continuous stream of orders from the same boss on compromise deals and is charged between £ 350 to £950 each time? Do you think it can be called a ‘independent’ firm? Do you think a conflict of interest might give rise to that?

It is not surprising that in these situations, some ‘recommended’ businesses might well be unwilling to negotiate on behalf of workers and are all too ready to agree that the first offer is the best offer available. They may be too eager to breeze through the compromise agreement or clarify it in very broad terms and seem eager to get workers as quickly as possible in and out of the door.

Employers should also be very careful of supplying a recommended business to workers.

At the very least, the employer should have a list of organizations that will advise the employee on enforcement arrangements, and the list should be a long list. We would suggest that on the suggested list, there should be at least 10 businesses. The employer should not state that if provided by any one or two designated law firms, they would only pay for legal advice, and the employee should always be advised that they are free to take advice from any firm of their choice. It is also possible that the practice of ‘bulk advice’ being given to departing workers at the employers’ premises on a specified day would bring into question whether the employee has actually obtained independent legal advice as required by law.


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