Compromise agreement (ED010)

If an employer and employee are in dispute then they may formally settle that dispute by entering into a legally binding contract called a compromise agreement. A compromise agreement can be used to settle any disputes which would otherwise have to be settled by an employment tribunal or a court. A compromise agreement will usually provide an employee with compensation. In return, the employee will agree not to pursue any legal claim that he or she may have against the employer (as well as agreeing to any further conditions that the employer may impose). Under this compromise agreement it is agreed between the employer and the employee that it represents effective and adequate compensation for having his or her employment contract terminated (whether that has occurred or will occur at a future date under the provisions of the agreement). A compromise agreement is only suitable where the parties have agreed a compromise figure. The figure will usually take account of a notice period as per the contract of employment or as per minimum statutory notice requirements.

See related law guides:

Employment - discipline & dismissal
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