Compromise Agreement: A Balanced Solution

Compromise agreements are a vital aspect of employment law, providing a solution to issues relating to payments for redundancy, unpaid wages, bonuses, and other entitlements. These agreements aim to provide clear information to both employers and employees. The study highlights that breach of contract can lead to legal action, and tax implications may arise under certain circumstances. Furthermore, confidentiality and non-derogatory clauses must be carefully considered when drafting an agreement. Overall, the assignment emphasizes the importance of procedures in drafting employment policies and ensuring consistent performance by all parties involved.

Employment law
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
1. A critical understanding of UK employment law....................................................................3
2. Evaluate the rules and principles that govern the contract between employer and employee.4
3. Law concerning wrongful dismissal, unfair dismissal and redundancy along with the
guidelines to effectively manage it..............................................................................................6
4. Evaluating the rules that govern discrimination and summarising the development through
statutory law with the help of given scenarios............................................................................8
5. Principles governing the negotiation and preparation of compromise agreements along with
advice upon
binding compromise agreements.................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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INTRODUCTION
Employment law helps in governing the rights and duties of employers and workers. It is
often referred to as labour law as well. Labour law mediates the relations between employers,
employees, government and trade unions. Various employment standards are there which govern
the socially acceptable conditions under which employees work. These rules are made to ensure
the safety of all the workers and ensure that they are not discriminated on any basis1. The case
study focuses on advising Whizz regarding the legal provisions that apply to the proposed
methods of reducing the workforce of the premises in Endmoor. Project also includes
explanations regarding the likely outcomes of particular courses of action taken by the company
and suggestions regarding how to manage the situation by avoiding or minimising legal actions
taken against the company.
1. A critical understanding of UK employment law
Employment law in UK addresses the legal rights, liabilities and duties of the parties to a
contract. These rules primarily ensure that the working conditions in which workers work are as
per the norms and guidelines given by government from time to time. These laws help the
employees to protect his interest as well2. These laws are made and based according to the
federal and state constitutions, court opinions, legislation and administrative rules. An
employment relationship in certain cases can also be governed by the employment contract in
certain cases. American labour laws find their existence from the oppressive practises that were
carried out by people at the time of industrial revolution. In early 20th century the laws were
made in order to compensate the injured workers and establish minimum wages along with
creating a standard rule for the work week. Child labour according to this new law is banned and
prohibited. Then in 1960s and 70s, government tried and prohibited discrimination practices and
made laws against the unsafe working conditions3. The most emerging issue in the current
scenario relates to the health care and equal pay for men and women. The major employment
issues deal with violation of “wage and hour”. The Federal government in UK has made laws
relating to the minimum and maximum working hours and special protections that must be given
1 Ford, K., Notestine, K. and Hill, R., 2000. Fundamentals of employment law. Chicago, Ill.:Tort and Insurance
Practice. American Bar Association.
2 Gennard, J. and Judge, G., 2002. Employee relations. London:Chartered Institute of Personnel and Development.
3 Barnard, C., 2012. EU employment law. Oxford University Press.
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to employees in the same context. All the states are compelled to follow the rules made by the
federal government along with some additional rules that can be passed by them for providing
further protection4. Various states have although adopted a higher wage system. In employment
law of UK, there has been a constant change in overtime pay related to wage and hours. There
are no rules that federal government has made related to the limit on the number of hours a
person need to work however they have stated that an employee will be given a half day leave
for every 40 hours of work. Working conditions and work timings for workers, who are below
the age of 18 years, are governed with the help of various rules in employment law. Special
provisions have been made for people who work in agricultural sector5. All the provisions under
the employment law force and bind the employees to keep a track record for the payments made
and salaries given to the employees and workers in the form of financials and payrolls
respectively. Employment law states the need and importance of various employment contracts.
It is essential to have one because it guides the presence and formation of contracts. A valid
employment contract must describe the length of employment, reasons for termination,
compensation, disciplinary proceedings, etc.
Another major reason to prove the existence of employment law is to ensure that there is
no discrimination in the work place where employees work6. For the same Civil Rights Act, 1964
have been made which make it illegal to treat workers differently on the basis of religion, belief,
age, gender, ethnicity or disability. The employment law enables a person to carry out legal
proceedings against the person by following a detailed procedure and obtaining a Right-to-Sue
letter from the EEOC (Equal Employment Opportunity Commission).
2. Evaluate the rules and principles that govern the contract between employer and employee
The contract of employment is an agreement that governs the relationship between
employer and employee. All the rules made between employer and employee must be written in
order to form a clear understanding of the roles and responsibilities between them. These written
conditions must be on a legal paper in the form of a contract which is known as an employment
4 Harvey, G., 2009. Employment relations in liberal market economy airlines. Employee Relations. 31(2). pp.168-
181.
5 Estlund, C. L., 2006. Between rights and contract:Arbitration agreements and non-compete covenants as a hybrid
form of employment law. University of Pennsylvania Law Review. pp.379-445.
6 Weiler, P. C., 2009. Governing the workplace:The future of labor and employment law. Harvard University Press.
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contract7. Employer must ensure that he does not employ any child labour in his premises as it is
against the principles of Employment Act. Rules made by the government relating to the
working conditions must be followed. This must involve systematic systems for the reporting of
fatal accidents, proper fencing wherever required, proper insertion of gauges and valves, etc. The
employment terms must be mentioned in the written contract in order to ensure that there are no
ambiguous claims later on. Minimum wages paid to a person must be according to the norms
decided by the government. Overtime hours and wages per hour must be guided by the Federal
government's rules and principles as well8. The living wages that must be given to the employees
is more than the amount decided for minimum wages. These rules must be ensured in order to
see that the worker who works full time is able to support himself and his family properly. The
working hours as per the rules are 8 hours per day and 2 additional hours in case of overtime.
The standard work timings must be in accordance with the rules prescribed in the Employment
act and further notices9. All the safety measures that need to be taken must be in accordance with
the rules prescribed by Federal government. No racial discrimination and gender discrimination
must be done that is illegal and unacceptable. The pay given to the employees must be fair and
reasonable depending upon the work they do. Proper maternity leaves that are stated in the law
and considerable must be provided to the female employees. If any employee is removed or
dismissed, proper reasons and grounds for dismissal must be provided to him (Barnard, 2012).
This will ensure that there are no legal proceedings against the company/employer and will
ensure a better brand image and goodwill of the company if there is a satisfied workforce. The
rules that govern the contract of employment between employer and employee must contain the
provisions related to travelling facilities, Medical aid facilities, promotions, liabilities, etc. There
are additional protections that are given to the workers in cases of a written contract. There must
be rules in the contract that compel the employer and employee to retain and maintain
confidentiality between them. This confidential information may relate to intellectual property,
trade secrets, customer connections, restrictive covenants etc.10. Rules regarding methods for
7 Stone, K. V., 2006. Legal protections for atypical employees: \employment law for workers without workplaces
and employees without employers. Berkeley Journal of Employment and Labor Law. pp.251-286.
8 Ford, K., Notestine, K. and Hill, R., 2000. Fundamentals of employment law. Chicago, Ill.:Tort and Insurance
Practice. American Bar Association.
9 Weiler, P. C., 2009. Governing the workplace:The future of labor and employment law. Harvard University Press.
10 Gennard, J. and Judge, G., 2002. Employee relations. London:Chartered Institute of Personnel and Development.
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payment must be followed. Rules relating to the grievance procedures must be followed. Various
pension related schemes must also be made between the employer and employee depending upon
the norms provided by the Federal Government.
The main rules that an employee needs to follow relate to their conscientious and diligent
performance work along with adherence to the orders of superiors, until and unless they are
violate the terms of the contract of employment and are contrary to law11. In addition to this, an
employee is required to
 Comply with the labour regulations and work time conditions,
 Comply with the provisions of occupational safety and health by keeping in mind their
performance,
 Promote a good brand image of the organisation,
 Protect the property of the organisation, and respect the confidential information that
could be detrimental to the employer if disclosed,
 Comply with the rules relating to social coexistence at the workplace.
3. Law concerning wrongful dismissal, unfair dismissal and redundancy along with the
guidelines to effectively manage it
The employment law in UK is a kind of law that speaks against the prejudice based
actions in workplace12. Depending upon this law, it is unfair and unlawful to discriminate against
the person because of the characteristic that has been provided to them in the law. This equality
based characteristic is known as “protected characteristic”. They are based on age, disability,
gender reassignment, marriage and civil partnership, race, religion or belief, sex, and sexual
orientation13. There are 3 laws that have been formed by the government regarding this. They
are: Trade Union and Labour Relations (Consolidation) Act 1992: These laws are used to
typically resolve the disputed that arise between the parties in their workplace. Various
Citizens Advise Bureaus and Employment Tribunals have been formed for the same.
11 Knight, K. G. and Latreille, P., 2000. Discipline, dismissals and complaints to employment tribunals. British
Journal of Industrial Relations. 38(4). pp.533-555.
12 Chapman, A., 2006. Unfair dismissal law and Work Choices:From safety net standard to legal privilege. The
Economic and Labour Relations Review. 16(2). pp.237-264.
13 Morris, D., 2001. The employment law implications of charity mergers. Employee Relations. 23(3). pp.271-289.
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 Protection from Harassment Act 1997: This law has ensured that no more discrimination
takes place on the grounds of work status, part time work, agency worker, fixed term
employee, etc.
 Equality Act 2010: The main legislation includes Equality Act, 2010 which speaks about
abolishing discrimination at work place, education, public services, private goods and
services or premises in addition to employment.
An employee can protest against dismissal if it is in three ways i.e., wrongful dismissal,
unfair dismissal and redundancy.
Wrongful Dismissal: It refers to a situation when an employee is terminated form
employment in situations when he contravenes the terms of contract. This contravention may
relate to express or implied terms14. It will wholly depend upon the formation of a contract when
read with the statutory terms. This states that an employee must be given reasonable grounds and
terms before dismissal. As per the case of Branch v Geys, reasonable grounds will depend upon
the professional status of the employee.
There are various guidelines that have been mentioned in cases where there is no contract
of employment relating to notice and disciplinary procedures which need to be followed before
dismissing any employee so as to prevent wrongful dismissal15. This states that in case of lack of
agreement, the employees must be given a reasonable time period of notice before dismissal. The
statutory notice is at least of 1 week and maximum of 12 weeks. Compensation in this case
varies and is usually equal to the normal salary. In case of misconduct by an employee, dismissal
can be on immediate basis.
Unfair Dismissal: Unlike wrongful dismissal, the rules of unfair dismissal are based on
sections 94 to 134A of the Employment Rights Act 1996. This governs the reasons which states
why employer has terminated a contract and also states what falls in the fair terms of dismissal.
No claim can be raised by the employee if he has given a voluntary resignation16.
14 Stewart, P., 2010. Employee relations. Emerald.
15 Cabrelli, J. 2003. EU employment law:From Rome to Amsterdam and beyond. Hart Publishing.
16 Bauer, T. K., Bender, S. and Bonin, H., 2007. Dismissal protection and worker flows in small establishments.
Economica. 74(296). pp.804-821.
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Guidelines to effectively manage unfair dismissal state that before dismissal employee
must be given reasonable and fair grounds which include the conduct of the employee, their
ability or qualifications, etc.
Redundancy: This relates to the specific kinds of dismissal where specific regulations are
attracted. It is governed by the principles of Redundancy Payments Act 1965, which states that
the staff is removed by the employee in case of non-requirement then he must receive proper
payment for losing his or her job17. This policy is designed in order to reduce the social costs that
the company may incur if they decisively remove the staff. The limit prescribed by the UK law is
as follows:
 Employees over age of 40 years receive 1½ weeks per pay per year they have worked.
 Employees over age of 22 to 40 years receive 1 weeks per pay per year they have
worked.
 Employees over age of 21 or less years receive ½ a weeks per pay limited to a maximum
of £464 per week.
In case of redundancy, following things must be kept in mind so as to manage it effectively:
 Employee who has worked for less than two years will not be eligible to claim under this.
 Genuine reasons must be given to the employee.
 Employees selected must be selected on a fair and reasonable basis.
 Before removing them, consultation must be done and adequate notice must be provided.
 Fair appeals must be invited.
4. Evaluating the rules that govern discrimination and summarising the development through
statutory law with the help of given scenarios
Discrimination refers to a situation where an employee is treated as less favourable based
on some protected characteristics18. It can be of two types: Direct discrimination and indirect
discrimination. Direct discrimination can be on the basis of age, disability, gender reassignment,
race, religion or belief, sex, marriage and civil partnership, and sexual orientation. For Example:
Treating a women less favourable than a man or vice-verse, comes under discrimination. As per
17 Larson, L. K., 2013. Employee Health-AIDS Discrimination. Larson on Employment Discrimination.
18 Employment contracts. 2014. [Online]. Available through: <https://www.gov.uk/employment-contracts-and-
conditions/contract-terms>. [Accessed on 18th November 2015].
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the case of Coleman v Attridge Law, it can be concluded that any person can claim
discrimination even if they do not come under protected characteristics and are still
discriminated because of someone they are associated with. Any motive of employer in carrying
out discriminatory practice is irrelevant19. This clearly means that even if an employee carries out
the same practice with an intention to help the less privileged groups, it will come under the
definition of discrimination. Similarly, indirect discrimination occurs when an employee without
any proper justification applies a common and neutral rule on all the employees of a specific
group which puts them in a particular disadvantage20. As per the case of Ladele v Islington LBC,
it was held that every person or couple must be treated equally in all circumstances and
situations.
Statutory law has developed over years which has helped in summarising the
development. An employee can be protected against discrimination by taking the help of
Equality Act, 2010. People can also act voluntarily by taking positive actions and responding
positively21. Various organisations have been made and people have been appointed to whom
complaints can be made by the aggrieved parties. Claims can be made in tribunals as well. Help
of Alternative Dispute Resolutions and mediations can be taken so as to solve disputes and
decide the facts of the case. But, first of all any discrimination noticed by the employee must first
be discussed to the employer or higher authorities and then taken in court's disposal22.
In the given scenario, Whizz engaged staff, Sales Executives and Senior Management
Team on standard terms and conditions that were as per the Employment Rights Act 1996,
except some minor modifications that were made in the job title, salary, etc. It must be kept in
mind that the modifications made in salary must be according to the minimum salary norms
provided by the government from time to time. In case of contract towards Senior Management
Team, there were clauses relating to garden leaves, working in rival company, dealing with
19 Van, D. H. S., 2006. Between consensus and compromise:acknowledging the negotiation dimension in
participatory approaches. Land use policy. 23(1). pp.10-17.
20 Ford, K., Notestine, K. and Hill, R., 2000. Fundamentals of employment law. Chicago, Ill.:Tort and Insurance
Practice. American Bar Association.
21 Stone, K. V., 2006. Legal protections for atypical employees: \employment law for workers without workplaces
and employees without employers. Berkeley Journal of Employment and Labor Law. pp.251-286.
22 Gennard, J. and Judge, G., 2002. Employee relations. London:Chartered Institute of Personnel and Development.
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existing customers of the company, restrictive covenants, etc. were legal. However the terms
restricting the employee to undergo similar work within the radius of 100 miles and working
with a rival company are not acceptable under the eyes of law. All these things can be effectively
managed if the employer makes rules and regulations by keeping in mind the Employment law
that is prevalent over the country and also by providing proper reasons and justifications in cases
of dismissal of employees. If this is not sufficient then he can take the case further depending
upon the nature of case and injustice.
5. Principles governing the negotiation and preparation of compromise agreements along with
advice upon binding compromise agreements
Principles governing the negotiation: Compromise is a specific form of contract
between employer and employee that is regulated by the statue. Under this an employee receives
consideration, which is mostly negotiated on the promise that he or she will have no further
claim against the company or employer in cases relating to breach of statutory obligation by the
employer23. It is the only form of agreement where statutory claims can be waived off by the
employee by stating it to be unfair dismissal, redundancy or discrimination. Compromise
agreement can be valid only if it is in written form and legal advice by an independent advisor
has been received by the employee. These agreements are governed by Employment Rights Act,
1996. The main principles that govern the negotiation and preparation of compromise agreement
is that in this case the employer is able to limit any future claims that arise from the employee's
side through an Employment tribunal24. The reason being that when an employee signs the
Compromise agreement, it becomes a valid proof and states acceptance of terms by the employee
that he or she is forgoing his or her right to make any further claims.
Principles governing Preparation: While preparing a compromise agreement, it must be
kept in mind that a waiver for any claim against breach of contract and statutory claims need not
satisfy the requirements of breach of contract in order to be declared valid25. All the agreements
23 Compromise Agreements. 2015. [Online]. Available through<http://www.clearanswers.co.uk/compromise-
agreements/compromise-agreement-guide.htm>. [Accessed on 18th November 2015].
24 Employment contracts. 2014. [Online]. Available through: <https://www.gov.uk/employment-contracts-and-
conditions/contract-terms>. [Accessed on 18th November 2015].
25 Employment status: Employee. 2014. [Online]. Available through: <https://www.gov.uk/employment-status/legal-
decisions-on-employment-status> [Accessed on 18th November 2015].
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made here must be modified and tailored in order to meet the facts and circumstances of law.
Thus it is not possible to adopt a single draft of compromise agreement. Any compromise
agreement between two or more parties must be kept confidential from other parties. The main
need for preparing a compromise agreement is that solution is required to be provided in issues
relating to payments for redundancy, unpaid wages, bonuses, pay in lieu of notice and any
holiday pay entitlement26. These agreements are designed in order to provide definite information
to both the employer and employee.
Advice: It must be kept in mind that in case of breach of the compromise agreement,
legal action can be taken against the person who causes a breach of contract. Also if any
financial loss has occurred due to this, then the other party can carry out legal proceedings
(against the accused party) in the court of law. It must be kept in mind that there are cases when
tax becomes applicable on certain elements under the amount received as compensation while
forming a compromise agreement. If an employee has signed a compromise agreement, then
before speaking about it in the press, he must first of all seek a legal advice before putting any
statements relating to it in the press because there may be various written clauses relating to
confidentiality and non-derogatory powers of employer. These powers may cause serious
penalties to the employee in case of any breach.
CONCLUSION
The entire study depicts that the contract of employment is according to the essential
components of employment. This relationship must be drawn by keeping in mind careful
consideration that is necessary to be given and mentioned while drafting an agreement. This is a
way in which the business can secures and draw maximum protection by enabling the employees
to know the terms that govern the employment terms precisely. The Law society helps an
organisation in finding a solicitor who can act for the organisations and help the employee. The
collective labour law relates to the trio relationship between union, employer and employee. The
project helps in demonstrating that labour law is concerned with the rights of an employee at
work place as well. There are various government agencies that enforce labour laws. It can also
be concluded that there must be procedures that must be followed in order to draft policies
26 Compromise Agreements. 2015. [Online]. Available through<http://www.clearanswers.co.uk/compromise-
agreements/compromise-agreement-guide.htm>. [Accessed on 18th November 2015].
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relating to employment and additional issues. This will ensure consistent performance of all the
individuals and organisation.
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