Compromise Agreements are most commonly thought of at the end of either a redundancy or disciplinary process and can often be used where an employer does not have legally justifiable means for summary dismissal of an employee i.e. the misconduct is not so great to warrant dismissal at this time. Generally the employer proposes to make an ex gratia payment to the employee in addition to any statutory entitlement they may have also i.e. statutory redundancy pay, notice payment etc.
There are several benefits for this type of agreement;
· They can help the employer avoid unwanted litigation – essentially the employee signs away their right to take a claim against the employer.
· The avoidance of litigation can essentially be a huge cost saving factor for the employer, costs can often be incurred by way of loss of time attending hearings, case preparation, legal fees and potential negative publicity that may be generated from a high profile unfair dismissals case.
· Without prejudice conversations can often be held prior to the agreement essentially easing the employee into the notion of the compromise. These conversations are generally off the record meetings which allow the employer to essentially putt the offer on the table and consider any requests the employee may have in terms of the agreement. This can often make the process of dismissal run much more smoothly.
· It can be a quick method of obtaining a desired outcome i.e. employee dismissal which alternatively may not have been obtainable over a short timescale.
· The agreement allows the employee to avail of a financial package relatively quickly – this can somewhat offset the financial implications of loss of employment for a short period of time.
· Employees can make a clean break from what may have been a less than harmonious working relationship with minimal stress and adverse publicity on their professional reputation.
· These agreements generally come with the guarantee of an acceptable reference which again allows the employee to progress with their career with minimal negative impact.
Whilst these agreements can be a useful and very effective tool for employers they are not without risk and it is therefore crucial that employers are certain that this is the road they wish to go down as a means of ending the relationship and that all aspects of the agreement have been duly considered.
In terms of Employment Law these agreements are often inadvisable as they are essentially in direct contravention of the Unfair Dismissals Act and can often leave an employer in a more precarious legal potion should the employee refuse the agreement. Dismissal can often become a much more difficult feat thereafter as the employee is aware of the employer’s prior wish to terminate the relationship putting them in a stronger position for an unfair/constructive dismissal claim. Compromise agreements can also be deemed in breach of Bunreacht na hÉireann in that they prevent an employee of their constitutional right of access to the courts. Notwithstanding this however they can be deemed valid where the employee enters freely into such agreement with a full and complete knowledge of their legal position. It is therefore vital that independent legal advice is sought by both parties before entering into any such agreement. While compromise agreements can indeed serve a very useful purpose, the key is to tread carefully and don’t leave the Company exposed by ‘showing your hand’ too early.
For further queries about compromise agreements, please phone our 24 Hour Advice Service on 01 8555050 and one of our advisors will be more than happy to assist.
