Compromise Agreement for the United Kingdom

Compromise Agreement Template for England and Wales

A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding contract under English and Welsh law that typically documents the terms and conditions of employment termination between an employer and employee. It includes details of any financial settlement, waiver of claims, and confidentiality obligations. The agreement must meet specific statutory requirements, including the provision of independent legal advice to the employee, to be legally valid and enforceable.

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What is a Compromise Agreement?

A Compromise Agreement (now known as a Settlement Agreement) is used in England and Wales when an employer and employee wish to resolve employment disputes or agree to terms for ending employment. The agreement provides legal certainty by preventing future claims in exchange for agreed compensation and benefits. It must comply with specific statutory requirements, including independent legal advice for the employee. The document typically covers termination payments, tax treatment, confidentiality obligations, and reference provisions. It's particularly useful in situations involving redundancy, performance issues, or workplace disputes where both parties seek an amicable resolution.

What sections should be included in a Compromise Agreement?

1. Parties: Identification of employer and employee, including registered addresses and company details

2. Background: Context of the agreement, employment history, and circumstances leading to settlement

3. Definitions: Key terms used throughout the agreement including Employment, Termination Date, Claims, Confidential Information

4. Termination Date: Specified date of employment termination and final day of employment

5. Settlement Payments: Details of all payments to be made including timing, method of payment, and conditions

6. Tax Treatment: Tax implications of payments and tax indemnities

7. Waiver of Claims: Employee's waiver of employment-related claims and statutory rights

8. Confidentiality: Obligations regarding confidentiality of agreement terms and employment information

9. Legal Advice: Confirmation of independent legal advice received and adviser details

What sections are optional to include in a Compromise Agreement?

1. Reference: Terms of employment reference and agreed wording for future references

2. Post-Termination Restrictions: Ongoing restrictions after employment ends including non-compete and non-solicitation provisions

3. Company Property: Return of company property provisions and confirmation of data deletion

4. Outplacement Support: Details of career transition support and conditions for receiving such support

What schedules should be included in a Compromise Agreement?

1. Schedule 1 - Claims: Comprehensive list of specific claims being settled under the agreement

2. Schedule 2 - Payment Calculation: Detailed breakdown of settlement payment including statutory and ex-gratia amounts

3. Appendix 1 - Adviser's Certificate: Independent legal adviser's confirmation of advice given and insurance details

4. Appendix 2 - Reference Template: Agreed form of reference template to be used for future reference requests

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Employment Rights Act 1996: Primary legislation governing settlement agreements, particularly section 203 which outlines requirements for valid settlement agreements

Equality Act 2010: Legislation covering discrimination-related claims and protections, ensuring the agreement doesn't inadvertently discriminate

Trade Union and Labour Relations (Consolidation) Act 1992: Legislation governing collective agreements and union-related matters in settlement agreements

Employment Relations Act 1999: Legislation establishing the right to be accompanied at meetings during settlement negotiations

Working Time Regulations 1998: Regulations governing working hours and leave entitlements that need to be considered in settlement terms

Transfer of Undertakings (Protection of Employment) Regulations 2006: TUPE regulations protecting employees' rights during business transfers, relevant for settlement agreements in business sale contexts

Data Protection Act 2018: Legislation governing the handling of personal data in settlement agreements and associated documentation

UK GDPR: Regulations ensuring compliance with data protection principles in settlement agreement processing

Pensions Act 2008: Legislation governing pension rights and obligations that may need to be addressed in settlement agreements

Written Format Requirement: Legal requirement that the settlement agreement must be in writing to be valid

Specific Claims Requirement: Legal requirement that the agreement must relate to particular proceedings or complaints

Independent Legal Advice Requirement: Legal requirement that the employee must have received independent legal advice on the agreement

Legal Adviser Insurance Requirement: Legal requirement that the advising lawyer must have professional indemnity insurance

Adviser Identification Requirement: Legal requirement that the legal adviser must be identified in the agreement

Statutory Conditions Statement: Legal requirement that the agreement must explicitly state that all statutory conditions for validity are satisfied

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Work Settlement Agreement

An England & Wales legal document settling employment termination terms, including compensation and confidentiality.

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What is a Compromise Agreement?

What sections should be included in a Compromise Agreement?

What sections are optional to include in a Compromise Agreement?

What schedules should be included in a Compromise Agreement?

Authors

Alex Denne

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