Compromise Agreements and Settlement Agreements
An employee can waive their contractual and common law employment rights but by law cannot be excluded from bringing proceedings for his or her statutory rights, e.g. unfair dismissal. There is a specific statutory exception where an employee can waive both contractual and statutory rights, namely where an employer and an employee enter into a “compromise agreement” or “settlement agreement”. It is essential that the agreement satisfies the statutory requirements, namely:-
- The agreement must be in writing.
- The agreement must relate to the particular matters that are in issue between the parties.
- The employee must have received independent legal advice.
- The independent legal adviser must have in force a policy of insurance or an indemnity covering the risk of a claim by the employee in respect of loss arising in consequence of the advice.
- The agreement must identify the adviser.
- The agreement must state that the conditions regulating compromise agreements under the Employment Rights Act 1996 have been satisfied.
Compromise agreements can and often are a useful mechanism for an employer to obtain an assurance that a departing employee will not bring a claim.