“If I’m being made redundant and have been asked to sign a compromise agreement should I use the company solicitor or an independent compromise agreement solicitor?”

Redmans Solicitors
October 19, 2012

This is a question we were asked by yesterday by someone who is currently undergoing a redundancy process at their employer. It is an interesting question and one that we get asked at Direct 2 Lawyers quite a lot. It’s also an important question – when you’re thinking of entering into a compromise agreement you’ll want and require advice from the best compromise agreement solicitor possible. We’ll therefore look at whether you can and should use an independent solicitor or a company solicitor when obtaining compromise agreement advice. We’ll look at the following issues in doing so:

What is a compromise agreement?
What are the obligations for a valid compromise agreement?
Can I use a company solicitor for a compromise agreement?
Should I use a company solicitor for a compromise agreement?

What is a compromise agreement?

A compromise agreement is a contract (created and enforced by statute) which allows an employee to waive their rights to pursue certain statutory and common law claims against their employer in return for the payment of a certain sum of money (or some other equivalent benefit).

What are the obligations for a valid compromise agreement?

For a compromise agreement to be valid the compromise agreement must, under s.203(3) Employment Rights Act 1996:

Be in writing
Relate to particular proceedings
The employee must have received advice from an independent legal adviser
The solicitor’s firm must have in force a contract of insurance indemnity insurance provided for by members of a profession or professional body

Under s.203(3)(a) a qualified independent person is:

A solicitor
A Trade Union official
Someone working for an advice centre; or
Some other person authorised by the Secretary of State

Under s.203(3)(b) someone can’t be a qualified independent person if:

They are employed by or acting for the employer or associated employer of the employee or worker
If the Trade Union advising is the employee or worker’s employer; or
If the employee or worker makes payment in return for the advice received;

Can I use a company solicitor for a compromise agreement?

Practically, you can use a company solicitor for your compromise agreement. However, under s.203 Employment Rights Act 1996 the compromise agreement will not be valid if the company solicitor advises you as you won’t have received employment law advice from a qualified independent legal adviser. This is because the company solicitor would be employed by or acting for the employer or an associated employer. The reason for this provision is that (quite obviously) the company solicitor would have at the back of his mind a commercial motivation when providing advice relating to the compromise agreement – they will want to obtain further work from the employer and may therefore give advice to the employee which won’t endanger the employer’s personal or commercial relationship with the solicitor.

Should I use a company solicitor for a compromise agreement?

If you’ve been offered a compromise agreement it’s normally in your best interests to obtain the advice from a suitably independent expert compromise agreement solicitor. If your employer states that you should use a particular solicitor for your compromise agreement then you have the right to immediately be suspicious – if your employer is referring a lot of work to a particular solicitor then it’s questionable whether that solicitor could be suitably independent for the reasons specified above. Ask your other colleagues (if possible) whether they were told to use a solicitor for their compromise agreement advice to determine whether this is the case. However, this can often be a tricky situation – your employer may refuse to contribute for the cost of advice if you hold firm and refuse to use the company solicitor. In all reality, though, your employer will often be prepared for you to obtain advice from a solicitor of your choice so it’s worth asking them.

Direct 2 Lawyers offer free employment law advice for employers.