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What are compromise agreements?

Published: 1 April 2021

Given the ongoing impact of Covid-19 it is no surprise that organisations are having to reassess their operations and in many cases are being forced to make changes to their business models. This may include closing offices or stores, relocating and, sadly, in some cases making staff redundant.

When a company needs to end an employment relationship it may look to do this by seeking a suitable way forward with an employee, often using a type of contract known as a compromise agreement or settlement agreement.

A compromise agreement is a legally binding contract. Under its terms an employee waives the right to pursue any claim or grievance they may have against the employer, in return for which they may receive a compensatory sum (eg in some cases an enhanced redundancy payment). Not all compromise agreements provide for a compensation payment – sometimes an employer may waive its right to take certain action against an employee.

If you are an employee who has been asked to sign a compromise agreement it is important to know what rights you may be giving up, what benefits are being offered and whether they are appropriate as well as understanding any other provisions within the agreement before signing it. Under the Employment (Jersey) Law 2003 an employee must receive independent advice on a compromise agreement.  This is very important given that under the agreement you are likely to be waiving statutory employment rights as well as the ability to bring other types of claim against the employer. Commonly the employer will  make a contribution towards the cost of obtaining independent legal advice. (Trade union reps and JACS can also assist where disputes arise and the right adviser may depend on the particular circumstances and the nature of a proposed agreement.)

Viberts Employment Team has significant experience helping clients achieve the best outcome when they have been asked to sign compromise agreements. We also understand how challenging the experience can be. If you need advice on a compromise agreement or any other employment matter, please don’t hesitate to contact us.

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