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Compromise Agreements Promoted To Reduce Unfair Dismissal Tribunal claims

Compromise agreements are being promoted by the coalition government in the hope of reducing the number of unfair dismissal tribunal claims


The coalition Government is promoting greater use of legal agreements as an alternative to cases being brought in the Employment Tribunal

Against a backdrop of public sector cuts and an increasing number of claims for unfair dismissal being dealt with by Tribunal service, the Department for Business, Innovation and Skills is putting forward possible changes to the system.

One of the proposals in their consultation document, “Resolving Workplace Disputes,” is that greater use is made of Compromise Agreements. These are documents which, as the name suggests, both parties agree to let go of their differences, with the employer paying a sum of money and the employee giving up the right they would have to take matters to the Tribunal.

Because the agreements require the employee to take legal advice before they can sign the document, the employer usually has to meet the lawyer’s bill – but the BiS document points out that this is far cheaper than having to instruct lawyers to prepare for a Tribunal hearing which could last several days, with the risk of a financial award at the end of it.

“It is clear from the number of claims to an employment tribunal that there are a significant number of cases where such agreements may potentially have been used but have not been, and we are keen to understand more clearly the reasons for this,” the document states.

“The Government recognises that for all employers there will be claims where it would be inappropriate to use a compromise agreement, particularly in terms of sending the wrong message to other employees. However, we want to know whether there are other factors affecting the use of compromise agreements.”

Because they are essentially private agreements, the Government may have difficulty in imposing Compromise Agreements, but the document is an indication that they are likely to ask the consultation service, ACAS, to encourage their use.

The BiS consultation runs until April, which means any changes will not be introduced until Autumn 2011.

Our employment solicitors have experience in dealing with all aspects of compromise agreements, both for employers and employees. The Glasgow Law Practice employment team can also provide practical advice on the prospects of a claim proceeding to the Employment Tribunal.