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Compromise Agreement – What is it and Why, When and How is one used?

Employment Law | Individual Legal Services

What is a Compromise Agreement?

A Compromise Agreement is a document that outlines an agreement between employers and employees to settle claims relating to unfair dismissal. It is important to note that a major condition of utilising a Compromise Agreement is that you as the employee are unaware of any reason that might justify your dismissal. If for any reason you think your dismissal might have been warranted, you may be unable to sign this agreement.

Is a Compromise Agreement financially motivated and will it be tax allowable?

A financial agreement that acts as a ‘pay-off’ from the employer to the employee is a possible outcome. If you are entitled to any payments from the period of your dismissal up to the point of devising the agreement (i.e. salary, holiday pay, outstanding expenses), these will be stated within the Agreement and should be considered as settled and legally binding as all other points stated within the Compromise Agreement.

If you are due a bonus or commission payment, this will also be laid out within the Agreement. Similarly, if you will not be receiving any bonus or commission payments, the employer will use this document as an opportunity to inform you of this. Issues relating to tax will be unique to each case, and it may be the case that you are not required to pay any tax on any monetary settlement. However, if the financial aspects are considered earnings, you are likely to have to declare the settlement as part of your income tax arrangements.

If I sign a Compromise Agreement can I also file a lawsuit against my employer at a later date?

This depends on exactly which claims the Compromise Agreement includes. It is highly likely that your employer will draw up an agreement that includes as many claims as he can think of, such as unfair dismissal and redundancy. If you sign a compromise agreement specifying that you surrender your rights to claim against, for example, unfair dismissal, you waive your rights entirely to claim for this within a court of law. Before you sign any agreement, be sure to read through all terms and conditions carefully, and if possible, have a professional read over a Compromise Agreement before you sign it.

Can I discuss the terms of compromise agreements with any external party?

Again, this will depend on the conditions stated within the Agreement. Your employer may include a clause that you cannot discuss the Agreement with any individual who is not directly related to either the company or the agreement procedure. Whilst this might initially sound like a minor issue, it might stop you from being able to discuss the terms of your dismissal with any future employer, potentially reducing the chances of any future employer hiring you. If you are not comfortable with the confidentiality aspects of the Agreement, speak to your employer and request that these clauses be removed from the document before you agree to sign it.

Will my employer pay for me to engage a member of Parslows Jersey employment lawyers to negotiate the terms of my Compromise Agreement?

There is no law that requires employers to pay for your legal representation. However, in recent years, it has become more common that some employers will contribute to your fees. Whilst you may have to personally fund the advice of a legal professional, it is always worth your time and money to ensure that you are agreeing to exactly what you think you are, and that there are no loopholes by which your employer could avoid paying the agreed sum.

For advice, assistance or further information about compromise agreements please do not hesitate to call 630530 or email us on employmentlawyers@parslowsjersey.com

Parslows Jersey can help

Our employment lawyers are experts in all aspects of Jersey employment law, including employment contracts and policies, redundancies, disciplinary, capability and grievance procedures, discrimination, compromise agreements and tribunal representation. Our lawyers have a proven track record in providing advice and representation on a wide range of employment law issues. Our employment lawyers have the experience and knowledge you need, whether advising on a contract or representing you in an employment tribunal. We’re committed to helping you get the best outcome possible.

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