If you’ve ever been a part of a workplace dispute or have ended an employment relationship, you may have been offered something known colloquially as a compromise agreement. But what is a compromise agreement?
Today, we know them as settlement agreements in the UK, and while they are legally binding contracts, designed to resolve disputes, they can also impact your ability to start a personal injury claim.
In this helpful guide, we’ll explain compromise agreements, how they work, and how they can affect any future possible personal injury claims.
How does a compromise agreement work?
Compromise agreements are legally binding contracts that aim to resolve disputes between employers and employees — often used when an employment relationship ends. The agreement usually includes provisions where you can agree to waive certain rights, including the right to pursue legal claims against the employer, in exchange for compensation or other benefits.
The reason these agreements are used is to create a clean break between the employer and employee, protecting the employer from future legal action. The key aspects of a compensation agreement are as follows:
- Compensation — This is a paid settlement that you’ll receive that might cover redundancy, notice periods or other terms agreed on.
- Waiver of claims — This is a clause that ensures you give up your right to bring future claims against your employer.
- Legal advice — You must seek legal advice before signing the agreement to make sure your rights are protected.
There are some exceptions to waiving future claims, the most important being that personal injury claims can still be made if the injury was unknown while the agreement was signed.
Key terms in a compromise agreement
There are a few key rights and clauses detailed in the average compromise agreement that will directly affect any personal injury claims you may want to make in the future:
Waiver of claims clause
Also known as an all claims clause, this prevents you from pursuing most legal claims against your employer. However, claims for personal injuries unknown at the time of signing are typically excluded.
Confidentiality clause
This prohibits you from disclosing the terms of the agreement or any disputes with your employer. In some cases, this can complicate pursuing personal injury claims if details of the agreement cannot be legally shared.
Why is legal advice mandatory for compromise agreements?
It is a legal requirement to seek independent legal advice before signing a compromise agreement. This is so it is clear that you understand the terms, know your rights and have the opportunity to push for better terms.
If you’ve been the victim of a workplace injury, having an expert solicitor on hand will be vital in pursuing the justice you deserve. At Injury Lawyers 4u, we specialise in legal advice for compromise agreements and help employees secure fair outcomes every day.
Tax implications of compromise agreements
Typical compromise agreements include compensation payments — that means they are subject to certain specific tax rules. How this works is that compensation for redundancy or loss of employment is tax-free up to £30,000 and any payments related to personal injury claims are generally tax-free. Also, wages, holiday pay, and payment in lieu of notice are all subject to income tax and national insurance contributions.
By understanding how this works, you can make sure you’re getting the most out of your settlement agreement.
What to do if you’re offered a compromise agreement
If your employer has offered you a compromise agreement or a settlement agreement, use this guide to help make sure your rights are protected:
- The terms — Always read the terms and conditions carefully and look for any clauses that could impact your ability to claim compensation for a workplace injury.
- Legal advice — Get in touch with Injury Lawyers 4u to evaluate whether the terms are fair and whether they properly protect your rights.
- Negotiations — We’ll help you to negotiate where necessary. This might be increasing compensation, clarifying rights or removing certain clauses.
- Alternate options — Be sure that you don’t rush into signing any agreement. Make sure it aligns with your interests, especially if you’ve suffered a workplace injury.
How Injury Lawyers 4u can help with your compromise agreement
At Injury Lawyers 4u, we’re adept in the complexities of compromise agreements and their implications for workplace injury claims. What’s more, our team specialises in securing fair compensation for injured employees, even if compromise agreements are involved. Contact us to find out more or to arrange for a free consultation with one of our expert lawyers.