Compromise agreements (now called settlement agreements)

Employers typically make payment of the non-statutory part of any enhanced redundancy conditional on the employee signing a compromise agreement (now renamed settlement agreements). The basic effect of this kind of agreement is to replace the employee’s right to bring claims against the employer in the Employment Tribunal with a contractual right to be paid agreed sums of money on the terms set out in the agreement. Employees must take independent legal advice on the nature and effect of the agreement for it to be valid.

In Garratt v Mirror Group Newspapers [2011] EWCA Civ 425, the Court of Appeal upheld an implied term based on custom and practice that enhanced redundancy payments were only payable to employees who had signed compromise agreements.