How compromise agreement can be helpful to employees and employers

by | Jun 1, 2010 | Employment Law

compromise-agreementAccording to the general rule, any stipulation in an agreement that denies an employee the right to initiate a legal action against their employers is illegal. Even after getting a fixed compensation from the employer, the employee can complain to an employment court regarding any kind of inconveniences caused by the employer. However the cases where the employee and employer decide to settle on a compromise agreement that fulfils the statutory requirements are exception to the rule.

What is a compromise agreement all about?

In general, a compromise agreement is an official and legally binding agreement that is made between an employee and an employer under which an employee agrees that he/she will not pursue their termination or employment in return of a fiscal settlement.

Under what circumstances compromise agreement is used?

An employer can use a compromise agreement as an option to go through the performance review, redundancy or disciplinary procedures with the concerned employee. A compromise agreement can also be used to determine all possible future claims and existing disputes at once without going through court or tribunal proceedings.

A compromise agreement can also be used for settling serious grievances that are raised by the employees. These grievances may include unlawful discrimination and constructive dismissal claims.

Some advantages of using compromise agreement?

Compromise agreement can be the best option when the employer wants to quickly take out an employee from their workplace. This saves the employer from going through the time-consuming legal procedures.

Moreover, a compromise agreement will also avoid a doubtful outcome from a court or tribunal hearing. And not forget the fact that it protects the employer from all the unfavourable publicity.


A compromise agreement is a simple and fast way to achieve mutually satisfactory settlement for both the employee and the employer. With the help of a compromise agreement, employers can avoid the uncertainty and cost of legal action. Thus, compromise agreement proves to be the best option for employers to avoid the legal formalities of courts.

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