Compromise Agreement Template - worked example

 

 

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This page displays the text of a worked example of a compromise agreement. 

 

A few key elements have been deleted, not only to defeat ill-advised copying but also to protect hard-pressed employers from unnecessary duress at the hands of the employee's lawyers.

 

  • To understand how and why it is drafted the way it is, click here.
  • For help with negotiations, click here.

 

 

Text of worked example

The cover sheet or heading must include these phrases:

 

COMPROMISE AGREEMENT

 

WITHOUT PREJUDICE AND

 

SUBJECT TO CONTRACT

THIS AGREEMENT IS DATED THE ——— AND IS MADE

BETWEEN:

—————-(the employer)

and

——-(the employee) both usually including abbreviated forms used in the remainder of the document.

 

BACKGROUND

(A) —— will be / was employed by ————– until the Termination Date;

(B) The parties intend that this Agreement shall have effect as a statutory compromise agreement;

(C) <deleted> see the automated template for details; and

(D) <deleted> see the automated template for details.

 

1. DEFINITIONS (various terms and shortened forms to make the rest of the document more succinct and readable)

In this Agreement:

PHRASE MEANING

“Agreement” the agreement between the parties contained herein

“Employment” the employment of —— by ————–

“Employment Contract” the contract of employment entered into by ————– and —— with a start date of ——————–

“Group Member” any one of ————–, its subsidiaries, its holding company or any subsidiary of its holding company from time to time (in each case defined by section 1159 of the Companies Act 2006 (as amended))

“HMRC” Her Majesty’s Revenue and Customs

“Independent Adviser” the person named in Appendix 1 to this Agreement

“Principal Claim” a specific claim submitted to an Employment Tribunal (if any) or otherwise the principal disputed issue

“Settled Claims” <deleted> see the automated template for details (under Section 98 of the Employment Rights Act 1996 (“ERA”) and/or other provisions of the ERA that deal with automatic grounds for unfair dismissal), a redundancy payment whether statutory or otherwise; breach of the Flexible Working (Procedural Requirements) Regulations 2002 and/or of the Flexible Working (Eligibility, Complaints and Remedies) Regulations 2002; under section 80H of the ERA; breach of the Working Time Regulations 1998; any breach of the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000; any breach of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002; unauthorised deductions from wages, failure to provide written particulars or guarantee payments under the ERA; any breach of the National Minimum Wage Act 1998; detriment short of dismissal under section 47B of the ERA; damages or compensation for personal injury <deleted> see the automated template for details.

“Termination Date” ——————

 

2. TERMINATION OF EMPLOYMENT

—– hereby accepts and confirms that his Employment with —————— will terminate on the Termination Date for reason of ——————-.

 

3. REMUNERATION TO TERMINATION DATE

3.1 ———- will be paid his normal salary up to and including the Termination Date (less PAYE Income Tax and National Insurance) and will be provided with all benefits for the period up to and including the Termination Date.

3.2 Other additions and subtractions may be detailed, as well as clarifying the situation in respect of bonus schemes, pension plans, etc as proposed and agreed during the negotiations.

 

4. TERMINATION PAYMENT (this details the financial aspect of what the employee is being given in return for surrendering his specified rights)

4.1 <deleted> see the automated template for details:

4.1.1 Here detail what has been agreed about extra payments, if any.

4.2 The parties acknowledge that the ex gratia Termination Payment is a non-contractual payment made in connection with the termination of the Employment Contract and is subject to the provisions of Clause 12. (Clause 12 [see below] verifies that the payment, up to £30,000 will qualify to be paid free of Income Tax and National Insurance contributions).

 

5. GARDEN LEAVE (You may prefer that the employee no longer has access to the workplace while negotiations proceed and his notice period expires. If so, a clause such as this should be included)

5.1 Prior to the Termination Date ——– shall not perform any services for ————- or any Group Member (Garden Leave).

5.2 During the period of Garden Leave —————— shall be under no obligation to provide any work to ——–, who shall have no right to perform any services for ————– or any Group Member.

5.3 During the period of Garden Leave —— shall:

5.3.1 continue to receive his salary and all contractual benefits in the usual way (subject to the rules of the relevant benefit schemes in force from time to time). ————- will declare these benefits to HMRC at the appropriate time and —— will be liable for any further tax or National Insurance contributions due in relation to them;

5.3.2 remain an employee of —————- and bound by the terms of his Employment Contract with ————–;

5.3.3 Further constraints and restrictions as proposed and agreed….

 

6. COMPANY OBLIGATIONS

6.1 <deleted> see the automated template for details:

6.1.1 If anything has been agreed about references, announcements etc, this should be detailed here

6.2 ————– agrees to pay up to a maximum of £——— (plus VAT) on the ——’s behalf to the Independent Adviser in respect of his legal fees incurred in connection with negotiating this Agreement and advising —— of its meaning. Any invoice should be in the ——’s name but expressed to be payable by ————– and sent under private and confidential cover to ——— at ————– at the address at the head of this Agreement . (The law requires that the agreement must be countersigned by a solicitor or other appropriate advisor acting on behalf of the employee, and it is normal practice for the employer to meet the cost of the advisor’s fees)

 

7. TERMINATION OBLIGATIONS

7.1 —— accepts and agree that any entitlement to any benefits will cease on the Termination Date.

7.2 Unless otherwise agreed in writing by ————–, —— shall return within 7 days of the Termination Date all property of ————– or any Group Member in his possession or control including but not limited to, all books, documents, papers (including drafts or copies), lists material, records or information kept on computer disk, credit cards, any mobile phones or devices, keys, or other property of or relating to ————–’s or any Group Member’s business. —— will delete any information belonging to ————– or any Group Member from any personal computer that he may have other than ————–’s offices without retaining in his possession or control any copies of any such information in physical, electronic or other format.

7.3 Any other loose ends to be tied up should be specified here.

 

8. CONFIDENTIALITY OBLIGATIONS (If the employee has been subject to agreements about confidentiality, a clause such as this should be included to clarify that he continues to be bound by them after termination)

8.1 <deleted> see the automated template for details:

8.1.1 his express and implied duties relating to confidential information will remain in full force and effect after the Termination Date notwithstanding the termination of the Employment Contract;

8.1.2 (Other contractual or additional confidentiality stipulations may be detailed here)

8.1.3 —— agrees that he will not make or publish any statement to any person, firm, company or organisation whether a client/customer, supplier, or employee of ————– or any Group Member concerning this Agreement or the circumstances surrounding the termination of his Employment save that the Employment came to an end by agreement(... etc ...)

 

9. WAIVER OF CLAIMS (This is the heart of the matter, where the employee surrenders the various claims that he has made or might make, with the exception of certain issues which cannot be surrendered in law)

9.1 <deleted> see the automated template for details;

9.2 —— shall accept the terms or obligations of ————– in Clause 6 in full and final settlement of:

9.2.1 <deleted> see the automated template for details;

9.2.2 any other claim for breach of contract or pursuant to statute or tort against ————– or any Group Member or its or their officers or employees arising on the Termination Date or otherwise in connection with the Employment Contract, the Employment and/or the termination of the Employment whether or not they are or could be in the contemplation of the parties at the signature of this Agreement, including claims which as a matter of law do not at the date of this Agreement exist and whose existence cannot currently be foreseen; or

9.2.3 any of the above claims set out in Clause under or based on European Union law (the Treaty of Rome or any other EU legislative provision) or the European Convention on Human Rights.

9.3 Any claim for sums and benefits due to —— under this Agreement or for accrued pension rights under any Company pension scheme or any personal injury claim of which he is not aware of the date of this Agreement (unless a head of damage which could form part of a discrimination claim) is excluded from Clause of this Agreement.

 

10. WARRANTIES AND REPRESENTATIONS

10.1 —— hereby warrants and represents to ————– that up to and as at the date of this Agreement:

10.1.1 <deleted> see the automated template for details;

10.2 It is prudent to insert a series of other warranties here, whereby the employee agrees that he has not omitted anything that might undermine the validity of the agreement.

 

11. CONFIRMATION BY INDEPENDENT ADVISER

11.1 —— confirms that he has taken advice from the Independent Adviser identified in paragraph 6. (being a relevant independent adviser for the purposes of the legislation governing compromise agreements) as to the terms and effect of this Agreement and in particular its effect on his ability to pursue his rights before an Employment Tribunal.

11.2 —— warrants that having taken such advice he:

11.2.1 is not aware of any claim or circumstance which might give rise to any claim which he could bring against ————–, etc etc in as much detail as the circumstances require.

11.3 —— acknowledges that the conditions regulating compromise agreements pursuant to Section 203 of the Employment Rights Act 1996, Section 18(1)(d) of the Employment Tribunals Act 1996, Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992, Section 49 of the National Minimum Wage Act 1998, Regulation 35 of the Working Time Regulations, Section 14 of the Public Interest Disclosure Act 1998, Regulation 9 of the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, Regulation 10 of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 and Section 147 of the Equality Act 2010, all as amended have been satisfied.

12. TAX INDEMNITY (This is a standard provision so that, in the hypothetical circumstance that the Government moves the goal posts regarding the tax concessions on “ex gratia” payments, the employer would not be liable for any tax so assessed)

—— will be responsible for the payment of any tax and employee’s National Insurance contributions referable to the Termination Payment and all other payments and the provision of benefits set out in this Agreement in excess of any PAYE deductions made by ————–. —— hereby agrees to indemnify ————– and any Group Member on a continuing basis against any tax, employee’s National Insurance contributions, penalties, interest, costs and expenses that ————– or any Group Member is obliged to pay in respect of the Severance Payment or any other benefit provided under this Agreement save any penalties, interest, costs and/or expenses arising out of any unreasonable delay or default on part of ————– and/or any Group Member. ————– or any Group Member shall not make any payment to HMRC without first informing him of such request by HMRC and allowing him a reasonable opportunity to dispute such payment. To the extent that any Group Member incurs any liability to tax in respect of any payment under this indemnity, he will pay such additional amounts to the Group Member as are required to ensure that the net amount received and retained by the Group Member (after tax) is equal to the full amount which would have been received and retained had no such liability to tax been incurred.

(The remaining paragraphs are standard legal provisions and are more or less self-explanatory.)

 

13. THIRD PARTIES

A person who is not a party to this Agreement may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999.

 

14. JURISDICTION

The terms of this Agreement shall be governed by and construed in all respects in accordance with English law and the parties agree to submit to the jurisdiction of the English courts.

 

15. BINDING AGREEMENT

This Agreement shall constitute a binding agreement as soon as it is signed by ————–, —— and the Independent Adviser, at which point its without prejudice nature shall fall away.

 

16. WHOLE AGREEMENT

Provided always that any obligations in the Employment Contract that continue to apply after the Termination Date will remain in force, this Agreement sets out the entire agreement between —— and ————– and supersedes all prior discussions between such parties or their advisors and all statements, representations, terms and conditions, warranties, guarantees, proposals, communications and understandings whenever given whether orally or in writing.

Personalised Agreement

 

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Personalised Agreement

 

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Personalised Agreement

 

  • From £39.95 + VAT 

 

  • 120 day money-back guarantee  

Personalised Agreement

 

  • From £39.95 + VAT 

 

  • 120 day money-back guarantee  
Developed with, and fully approved by, Employment Law specialist Guy Thompson of Guy Thompson & Co, regulated by the Solicitors Regulation Authority, Reg. No. 389258.