Why is a Compromise Agreement Necessary?
The use of compromise agreements in redundancy situations is a relatively recent development and has been initiated mainly by employers who want to prevent employees complaining to a tribunal after they have been made redundant.
If an employer does not comply with the law in making redundancies (perhaps through failing to consult properly, failing to use fair selection criteria etc) an employee can complain to a tribunal that the redundancy was unfair. This can be done after the redundancy and could result in an award of compensation or even reinstatement.
The only way an employer can be sure that an employee will not complain to a tribunal after redundancy is to persuade them to sign away their right to do so. This can be done in a compromise agreement and has the effect of turning the redundancy package into a "full and final" settlement of any claims the employee has against the employer.
Compromise agreements are also commonly used in employment situations other than redundancies and have the same “full and final” effect.