What is a compromise agreement?

A compromise agreement is a legally binding agreement in which an employee accepts a financial settlement from an employer, and agrees to leave the organisation, in exchange for waiving his or her right to pursue a legal case against the employer.

A key feature of a compromise agreement is that, in order for it to be legally binding, it must have been explained to the employee by a qualified lawyer, trade union official or advice centre worker, and that person must be covered by an appropriate certificate of indemnity insurance.

The advice should include whether the terms of the offer are fair, and whether the amount of compensation is suitable, taking into account the number of years worked, salary, job title and the reason for termination.

Although the employee is free to choose whom to get this advice from, it must be paid for by the employer (there is a nominal limit on the amount, but it would be very unusual to reach this). The intent is that the employee must fully understand and agree with all the terms in the agreement, even when it is written in legal language. The person giving the advice must also sign the agreement and certify that the appropriate advice has been given.

When might I be offered a compromise agreement?

A compromise agreement is often reached as a result of a formal disagreement of some kind between you and your employer. Examples might include: breach of contract, a disputed disciplinary or performance management process, a grievance or complaint, an irretrievable breakdown in a professional relationship, a change of the employee’s terms and conditions, or poorly-handled health or disability issues.

Why do employers offer compromise agreements?

Employers favour compromise agreements because defending a claim at a tribunal potentially costs reputation, money and management time. A compromise agreement removes the possibility of a legal case being brought at a later date.

What are the benefits of a compromise agreement for the employee?

The negotiation of a compromise agreement may often result in a larger settlement than the employee would receive from a tribunal. The payment is usually made between 7 and 14 days of leaving, without the stress and delay involved in a tribunal.

If a case goes to tribunal, is it too late to reach a compromise agreement?

If a case goes forward to tribunal, an agreement may still be reached before the hearing begins with the help of the arbitration service, ACAS, a representative of which will have been assigned to the case. In this situation, the agreement is referred to as a COT3, after the name of the form that is filled in. If an agreement is made during the hearing, it is called a consent order.

Things are going wrong at work. How can I engineer a compromise agreement?

In short, unless you have grounds to believe your employer has acted in a way that contravenes your legal rights, you cannot ‘engineer’ a compromise agreement.

A site like this cannot cover all the potential rights that you have, and all the ways they could be contravened, which is why it is so important to be a member of a relevant union. If you are not a union member, and things have started to go wrong at work, it is still worth joining the most relevant union as soon as you can – you may be lucky, and they may be willing to represent you. If an agreement is being negotiated for other union members, you may get the benefit of group representation. At the very least, you should be able to call their help line for advice on your rights.

Alternatively, make an appointment with the Citizen’s Advice Bureau, who can provide excellent advice, or contact ACAS.