Compromise Agreements and Redundancy

 

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Compromise Agreements and Redundancy

 

Section 139 Employment Rights Act 1996 states:

 

"... an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is attributable wholly or mainly to:

 

  • the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased, or intends to cease, to carry on that business in the place where the employee was employed or

 

  • the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he was so employed, have ceased or diminished or are expected to cease or diminish".

 

Compromise Agreements are often used to safeguard the interests of both employer and employee when redundancy is the agreed mode of parting. The law is, relatively speaking, unusual in this regard because it allows the departing employee to sign away, literally “compromise”, his statutory rights.

 

The employer generally wishes to eliminate the possibility of the employee lodging a case with an Employment Tribunal.

 

The employee generally wants a sweetener of some kind to give up the right to appeal to an Employment Tribunal, hence the ex gratia payment.

 

A Statutory Redundancy Payment will still be required. There is a calculator here.