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Compromise to settlement - Is the real power in the name?

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A contract/common-law claim, that is where there has been a breach of the employee’s contract i.e. a wrongful dismissal claim or for a personal injury claim can be resolved by means of a contractual waiver.

A statutory claim, however, and that is one which arises through legislation, so for example:  

  • Unfair dismissal;
  • Discrimination;
  • Claims regarding maternity, paternity, adoption and parental leave and flexible working;
  • Redundancy payments. 

Will be void unless such claims are waivered by way of: 

  • A settlement through ACAS, via use of a COT3 form.
  • Recorded in a Settlement Agreement (formally known as a Compromise Agreement) that complies with certain statutory requirements. 

If none of these options are appropriate, then consideration can be had to agree for part of the settlement to be paid after the time for bringing the relevant claims has expired.  If this is the only option available to the parties then we would suggest further advice is taken before pursuing with this method. 

On 29th July 2013 Compromise Agreements were renamed as Settlement Agreements.  The reasoning for the changes was as follows:- 

  • The word settlement more accurately describes the use of such agreements and therefore this may encourage more disputes to be settled in this way, on the basis employees will not be seen to be compromising their position.  
  • Settlement Agreement is a more widely understood term.

It is to be noted that it seems unlikely that using the incorrect terminology after 29th July 2013 would invalidate an otherwise valid Compromise/Settlement Agreement. 

If you require any further information with regard to Settlement Agreements then please do not hesitate to contact Alexandra Dean on 01245 228141 or, deana@gepp.co.uk.