Compromise Agreements on The Rise

The role of compromise agreements in appeasing conflicts and disputes resulting from redundancies is on the rise, as businesses are increasingly using them as a tool with which to resolve redundancy situations. Given the present state of the economy and wide scale cuts in the public sector along with stagnant growth in the private sector, redundancies are becoming more and more common. Many HR practitioners are seeing compromise agreements as their preferred solution to the majority of disputes that arise.

A recent survey into the increased prevalence of compromise agreements canvassed HR professionals in 101 of the UK’s leading organisations, to find out more about how compromise agreements are viewed by those that use them.

The statistics found that 82% of the HR practitioners who responded to the survey were in favour of using compromise agreements rather than contesting the case at an employment tribunal. The reasons given for this preference were the fact that over three quarters of the respondents were worried about the escalatory costs of many employment tribunals, whilst 63 per cent would rather not drag the company name through the courts and risk damaging its reputation.

One of the main concerns both employers and employees have about compromise agreements is the confidential element of the agreement, which is particularly important when an employee who is high up in the organisation, such as a director, is made redundant. In these circumstances a confidentiality clause could be included in the compromise agreement to ensure that information which could be potentially damaging to the company does not enter the public domain.

In the vast majority of cases compromise agreements are upheld, with employer and employee both keen to put the incident behind them. If an employee could show there had been a breach of a compromise agreement by the employer then they might well be able to make a claim for compensation. On the other hand, any disparaging comments made by the employee about their former employer could count as slander and may result in a breach of the compromise agreement.

Along with their use in cases of redundancy, compromise agreements are also a common method of resolving incidences surrounding dismissal, failure to consult, protective awards and collective consultation. However, compromise agreements can be used in almost any situation where the terms and conditions of an individual’s contract of employment have changed.