I was with a client recently who has parted ways with his former employer under a compromise agreement or, as they are now more palatably known, a settlement agreement. The subtle change in words suggest something more positively negotiated than a compromise, that has a whiff of reluctance about it. Nonetheless, the outcome is the same, and that outcome usually works for the employer better than for the employee in the long run.
In most cases the reason for the compromise, sorry settlement, is to enable the employer to get rid of someone in circumstances where the employee might other wise have a claim for unfair dismissal for example, where the employee having not performed poorly over a period of time as measured by a performance management programme, or where their role is not being made redundant.
I’ve worked with several people who have agreed to leave an organisation with a generous pay-off (and sometimes a not so generous pay-off) simply because they were at something of a loose end without anything realistic they could do to justify their salary. Rather than go through a formal redundancy process it’s sometimes easier and more convenient for both parties to agree to part company with an enhanced pay-off.
However, in a small number of cases, the reason is more serious. It may be that an incident has taken place where the employee has experienced a form of discrimination and rather than drag the employer through a tribunal process, the employer may persuade them (perhaps with good reason) that a quiet settlement would be better for all concerned. Another case I dealt with concerned an employee not seeing eye to eye with a newly installed boss (for which read “new boss wanted to bring their own guy in”). You can see why in such cases it is important for the employer to draw a line under the affair in order to avoid publicity.
The deal will comprise a pay-off, a nice reference and a gag. The problem for the former employee is that such agreements often lead to curiosity and suspicion and without the ability to explain the circumstances of the departure, the employee may find themselves rejected for another candidate when they apply for another job. This can be a particular problem at times like these when prospective employers have enough choice of candidates to be able to exclude any that come with unexplained baggage.
Furthermore, it is very unusual for people to leave a job without another to go to when unemployment is high, so people really need to be prepared to answer the question about why they have done so and not assume it will be overlooked. Employees are often on the back foot in such circumstances and this might lead to them agreeing to a deal more rapidly than they ought. With the temptation of a chunky pay-off and a glowingly written reference people often think there’s no downside. It’s only later on when the restrictions on what they can say start to cause them difficulties.
If you find yourself in this situation take professional advice to make sure you are thinking about all that needs to be thought about. Your employer should be prepared to pay for this advice. You also need to be sure you can answer the inevitable interview question – “why did you leave your last job?” Can you look the interviewer in the eye and give an honest answer? If not, you haven’t covered well enough what should and shouldn’t be restricted. Your advisor should be able to help you find a form of words that protect the interests of both parties. That set of words is critical to your ability to secure a new job so it requires plenty of consideration before you sign the agreement. Remember that you have done nothing wrong and this exercise is for your employers convenience. Don’t let them make it a future problem for you.