Compromise Agreements
A compromise agreement is a specific type of contract, regulated by statute, between an employer and its employee (or ex-employee) under which the employee receives a negotiated financial sum in exchange for agreeing that he or she will have no further claim against the employer as a result of any breach of a statutory obligation by the employer. A compromise agreement is generally used where an employee has been dismissed.
The advantage for the employer is that they are able to draw a line under an employee's departure and feel protected from future claims. The advantage for the employee is the financial sum received in return.
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