Bristol Solicitors

Do compromise agreement exclude all claims by an employee ?

No. It is unlawful and impossible for an employee to contract out of claims for :-

• Personal Injury claims
• Pension Rights
• Breach of the compromise agreement by the employer

The employee is asking for the whole amount payable to be paid tax free – is this possible ?

There are 4 main points about this :-

1.       Tax should be paid on any contractual entitlements of the employee such as entitlement to  notice pay, untaken holidays or bonus. The position may vary if the contract has a pay in lieu of notice clause. In summary, there may be a risk of paying the full amount gross in these circumstances

2.       Compensatory amounts are only tax free up to £30,000.00. Any balance should be taxed

3.       Redundancy payments, either contractual or statutory are usually tax free up to £30,000.00

4.       It is standard for compromise agreements to include an “indemnity clause” whereby the employee agrees to indemnify the employer against any tax claims for sums payable under compromise agreements which have not been paid. However, it is one thing having such a clause and another thing having to sue the employee and getting any money back

Is the employee entitled to a reference ?

In law, no. Unless the contract of employment provides a contractual right, which is very rare, a reference is discretionary but employees commonly seek to negotiate a reference as part of compromise agreement negotiations. Care always need to be taken with references and to avoid a recommendation for a future role. It is important to stick to statements about the employee whilst your employee.

What is gardening leave?

Gardening leave is the term given to an employer’s right to prevent an employee actually coming into the office to work while still in paid employment. Whether an employer has such a right in strict legal terms comes down to the contract of employment but employers may decide that it will be too disruptive to have the employee in the office or that he or she may steal business information or clients. If the contract does not provide for gardening leave, this is commonly part of the negotiations leading to a compromise agreement and it would be a rare occurrence for an employee to take legal action to enforce a right to come to work !

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