A step by step guide to settling disputes via a compromise agreement
A compromise agreement (or settlement/severance agreement) is a legally binding contract between an employer and a departing employee. The contract brings to an end the employment relationship and usually provides for a severance payment to be made to the employee. In return for that payment, the employee agrees not to bring any claim or grievance relating to employment matters against his or her employer.
Compromise agreements are utilised in a number of situations but most notably to:
- Settle an existing employment dispute;
- Remove an employee on the grounds of poor performance or due to friction in the workplace;
- Avoid legal challenge in a redundancy situation;
- Remove senior staff discretely.
Any employee considering a compromise agreement should take independent legal advice on the agreement. It is standard practice in Jersey for employers to meet the costs of this advice, usually capped at £500. Key areas that often require careful thought and discussion with a legal advisor include the:
- Structuring of payments under the agreement;
- Treatment of employee benefits;
- Role of restrictive covenants;
- Appropriateness of obligations around confidentiality/secrecy;
- Suitability of the waiver clauses included;
- Resignations from and indemnities in relation to professional roles held, such as directorships or in respect of principal person status;
- Provision for and terms of any future reference from the employer.
If you are an employer or employee requiring advice on compromise agreements, please contact Advocate Caroline Dutot on 01534 481809 or by email on cdutot@ardentchambers.com
