Make sure you get a fair settlement if you are made redundant

Workers facing redundancy are being urged to ensure they get a fair settlement if their employer puts pressure on them to sign a compromise agreement.

The warning from the Law Society comes after a surge in the use of compromise agreements because companies have been forced to lay people off during the current economic downturn. The agreements are also used when settling some unfair dismissal claims or cases involving discrimination.

They usually require an employee to waive the right to make a claim against the employer in the future in return for a financial settlement now. They can be very helpful to both sides in ensuring a clean break that is fair to everyone.

However, the Law Society fears that many redundant workers are signing the agreements without getting the full entitlement they deserve.

The Law Society President Robert Heslett said: “Compromise agreements are an effective tool in ensuring both employer and employee can resolve an issue fairly. However, the agreements will usually emanate from the employer and employees should not take it as read that it is the best deal on the table.

“Seeking the advice of a solicitor once the agreement is offered is essential. Without one, employees could be walking away with a settlement which is far from a compromise. A solicitor can negotiate on an employee’s behalf.”

It is a legal requirement that employees receive independent advice before signing a compromise agreement. Many employers are prepared to pay for this advice or at least contribute towards the cost in order to smooth the process along.

In means that in many cases, employees will be able to receive expert advice at no or minimal cost to themselves. Mr Heslett urged employees to consult a solicitor as professional advice can make a big difference to the kind of settlement achieved.

“What might appear to be a golden handshake of sorts might not be best for the employee, especially in the current job market. Four month’s pay might sound like a good offer, but if your notice period is three months, you are really only getting an extra month’s pay to leave quietly.”

Compromise agreements are not only about money and waiving the right to make future claims. Some employers may want to insert clauses preventing the employee from making derogatory remarks about the company to the press. They may also include a covenant preventing the employee from competing against the employer by setting up a rival company.

The agreements can be complex and restrictive as well as offering the employee less than the full entitlement. People facing this kind of situation should always seek legal advice to protect their interests.

Please contact us if you would like more information.

 

November 2009

The views expressed in this article are those of the article contributors, for which Judge & Priestley LLP accepts no responsibility. Readers should take appropriate legal advice before acting on any issues raised