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Employment Solicitors ThomasMansfield advise familiarity with compromise agreements

The employment law experts respond to the recent case of Palihakkara v British Telecommunications PLC and encourage employers and employees to take note
Surrey, UK, Ukraine ( 27/08/2011
In the current economic climate compromise agreements are now a familiar feature of the employment landscape.

ThomasMansfield Employment Law Solicitors regularly advise both employers and employees as to the terms and effect of a compromise agreement ( ); but what are they?

The facts

Compromise agreements are written agreements that provide an effective means of drawing a line under employment disputes and preventing employment tribunal proceedings and other legal action.

It is not enough for the employer and the employee to agree between themselves in exchange for money that the employee will not pursue legal action. The compromise agreement must be in writing, and meet specific statutory requirements to prevent legal action. Furthermore, the employee must have received advice from a relevant independent adviser be it an employment solicitor ( ) or a trade union representative.

The case of Palihakkara v British Telecommunications PLC is a salutary lesson to employers who do not instruct the services of specialist employment law advisers to draft their compromise agreements for them. In this case the employee entered into a compromise agreement to settle “all claims past or future arising out of her termination of employment”. The agreement focused solely upon claims arising on termination and not those claims that could have arisen during the course of the employee’s employment such as harassment on the grounds of race or sex discrimination. As such, the employee was free to pursue those claims notwithstanding the existence of a compromise agreement.

Common terms and conditions that one might see in a compromise agreement include the settlement package which is of course the all important aspect of the agreement for the employee.

Compromise agreements are often presented as a means of making a payment to an employee on a tax free basis and this can be an attractive proposition particularly given the fact that in certain circumstances, up to £30,000 is capable of being paid without deduction of income tax.

Another important provision of compromise agreements, particularly from the employer’s perspective, is the requirement for confidentiality surrounding the terms of settlement. The last thing the employer wants is to create a precedent that it makes payments to all employees on termination. In addition, the employer and the employee will want to ensure that neither makes derogatory comments about the other. If the agreement is properly drafted and worded to encompass all possible legal claims that the employee may bring, future headaches will be avoided.

For more information on compromise agreements and other employment law news, visit ThomasMansfield at: ( )

About us
ThomasMansfield LLP is the leading nationwide independent firm of employment law solicitors specialising exclusively in employment law, HR support, workplace mediation, employment law training and health & safety.
The firm encourages inquiries and claims from employees and employers alike. Services range from case work on discrimination and unfair dismissal, as well as advisory and consultation roles for businesses looking to incorporate a high level of legal security into their infrastructure and workforce management.



Thomas Mansfield Solicitors, winners of the Innovation Award at the Law Society’s Excellence Awards 2009, are specialists in Employment Law and can provide sound and knowledgeable advice on all legal matters regarding employment, including unfair dismissal, break of contracts and compromise agreements. For more information please visit


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