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Redundancies & compromise agreements…

16/01/2012

Mark Jackson

As a result of the current economic climate, the last few years have seen a sharp rise in redundancies.  Only last week Ulster Bank Limited announced that they will be making a further 350 redundancies in Northern Ireland – see here for the story.

The rise in redundancies has in turn seen an increase in the number of people who need advice on a compromise agreement.  Employers are increasingly using compromise agreements, especially in a redundancy situation, to avoid any potential future litigation as a result of bringing the employment to an end by offering some sort of financial settlement in return for the employee agreeing not to sue.  It can be daunting when handed a legal document by an employer that looks complicated and full of legal jargon.  Plus, if you’re being asked to enter into a compromise agreement, you’ll need to get advice from an independent solicitor to explain what the document means if it is to become legally binding.  So what is a compromise agreement?

A compromise agreement (which may also be referred to as a termination or settlement agreement) is an agreement between employer and employee where the employee accepts a financial package (usual elements include compensation for loss of employment, a payment in lieu of working a period of notice, etc) in return for giving up certain rights – primarily agreeing not to bring any claim against the employer for breach of contract, unfair dismissal or any discrimination related reason.   Once entered into between the parties it is legally binding.  In order to be legally binding the employee must take independent legal advice on the terms of the agreement from a qualified legal adviser – normally a solicitor.  The employer will usually pay for the cost of that advice, or at least make a contribution to the cost of that advice.

If you find yourself in this situation, it is very important that you seek advice from a solicitor who deals with employment law so you can obtain advice on whether to enter into the agreement in the first place.  For example, it may be that you have reasonable prospects of success with a claim for unfair dismissal, or have been unlawfully discriminated against, and may be better not to sign the agreement.  Alternatively, if the advice is to accept the financial settlement in the agreement, advice is still necessary to ensure the terms of the agreement are reasonable.

We provide advice to both employers and employees on employment law matters, including redundancy and compromise agreements.  If you have an employment related query, or require advice in connection with a compromise agreement, please do not hesitate to contact us on 028 91 811652 or by email using the details on this site.

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