Settlement agreements

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If you have been offered a settlement agreement or have a question you wish to ask in relation to one, please contact our specialist employment settlement agreement solicitors for advice on 0800 118 1500 or complete our online enquiry form on our website home page.

Advising our clients on settlement agreements is one of our specialist areas and something we do almost every week. A settlement agreement can come out of the blue or you may have seen it coming for a while. Either way, you are likely to have a number of questions about the offer and whether to sign it. 

Our Employment & HR Team

We understand that negotiations can be difficult and stressful, particularly when you are still employed and your future employment is uncertain.  We’re here to support you, as much or as little as you need. We are happy to deal directly with your employer or, if you prefer, we can advise you so that you have the knowledge to negotiate directly with your employer.

We always take the time to listen to you to find out why your employer has offered you a settlement agreement, in order to advise you whether to accept it, or whether you should negotiate with your employer to obtain more compensation and/or better terms. Our employment law experts will help you achieve the best possible settlement.

We appreciate that you may be placed under pressure to return a signed settlement agreement to your employer quickly, which is why we endeavour to arrange an appointment the same day, if not the following day, and will prioritise these appointments as best we can.

We have a great deal of experience in advising on and negotiating settlements for employees to exit their employment, and will always endeavour to do our best for you. We regularly advise a range of clients from public and private sector workers to directors and shareholders.

Below you will find a range of FAQs which we have put together, to help you understand the process and terminology better.

What is a settlement agreement?

A settlement agreement is a legally binding contract where an employee agrees to give up any employment claims against their employer, usually in exchange for financial compensation.

An employer will often use a settlement agreement to set out the terms under which an employee will leave the company, and it will usually be offered shortly before or after the termination of employment. Once a settlement agreement has been signed, an employee will no longer be able to make an employment tribunal claim or any other type of claim against its employer that has been listed in the settlement agreement.

Employers can also use a settlement agreement when an employee is staying with the company, but the employer wants certainty that an ongoing dispute has been fully resolved and its employee will not issue a claim in the employment tribunal.

Remember, a settlement agreement is voluntary and you are not obliged to sign it.

If you are offered a settlement agreement it is important that you seek expert advice from an employment law solicitor before agreeing to sign it as once signed it will be binding on you and your employer.

What is a compromise agreement?

Up until 2013 settlement agreements were known as compromise agreements. New laws were introduced at the same time as the name change, making it easier for employers to confidentially offer settlement agreements even when there was no dispute with the employee.

Why do I need advice from a settlement agreement solicitor?

If you have been offered a settlement agreement, your employer has to make sure you receive independent legal advice before signing, otherwise the agreement will not be enforceable. The reason behind this is to ensure you fully understand the implications of entering into this agreement.

By signing the settlement agreement you will not be able to bring a claim in the employment tribunal or courts, therefore it is really important that you get advice so you know what claims you will be waiving and how valuable they are.  This advice will enable you to make an informed decision about whether to accept the settlement agreement offer.

Our settlement agreement solicitors are able to provide this advice face to face or over the telephone at your convenience. Please contact us to arrange an appointment if you have been offered a settlement agreement.

What are the requirements of a legally binding settlement agreement?

For the settlement agreement to be legally binding the following conditions must be met:

· The agreement must be in writing

  • The agreement must relate to a particular complaint or proceedings
  • The employee must have received advice from a relevant independent adviser, such as a lawyer or a certified and authorised member of a trade union
  • The independent adviser must have a current contract of insurance or professional indemnity covering the risk of a claim by the employee in respect of loss arising from the advice
  • The agreement must identify the adviser
  • The agreement must state that the applicable statutory conditions regulating the settlement agreement have been met

If you are offered a settlement agreement your employer should provide you with a reasonable amount of time to consider the proposal and the terms.  The Acas Code of Practice on settlement agreements specifies a minimum of 10 calendar days unless the parties agree otherwise.

Why do employers use settlement agreements?

If your employer proposes to end your employment, either because of redundancy or an ongoing workplace dispute, a settlement agreement is used to agree the terms under which you as the employee will leave your job.  An employer will normally use a settlement agreement so both parties can part ways on amicable terms rather than putting you through a lengthy process, such as redundancy, performance/absence management or disciplinary.

Another example of when a settlement agreement may be offered or requested is where the employment relationship breaks down either between you and your employer or between you and your colleagues and both parties want to agree an amicable parting of ways.

Can you ask my employer for a settlement agreement?

Yes.  You do not need to wait to be offered a settlement agreement from your employer and can request one at any point.  We would recommend seeking expert legal advice before making such a request so that you are aware how to do it and how much to ask for given the strength of your claims.

If your employer refuses your request for a settlement agreement and providing you have followed the correct process your employer cannot refer to this confidential conversation in an employment tribunal.

We often assist employees with their grievances/concerns and take the first step to request a settlement on their behalf.

Is the settlement agreement offer fair and should I accept it?

That depends on the offer, the strength of any claims you may have, how long you have been employed and other factors which are personal to you.  Our employment law experts can provide you with advice on whether the offer is fair given your circumstances.

What terms might a settlement agreement include?

There are a number of terms we can include and/or advise you in your settlement agreement to address your specific needs, including but not limited to:

  • How much compensation will be paid to you and when (including what amounts will be taxed)
  • A list of the claims waived/settled
  • A clause about any claims that should be excluded
  • An indemnity requiring you to pay tax
  • The date your employment will end
  • Confidentiality
  • Restrictive Covenants
  • Warranties
  • Obligations not to disparage
  • Agreed Reference
  • Contribution to legal costs
  • Any entitlement to bonus, shares and any other payments.

The exact terms will depend on your circumstances and what you want to achieve.  We will be able to discuss your needs with you to secure the best terms for you.

What are the benefits of signing a settlement agreement?

  • It allows for a clean break in your employment relationship
  • It can be a quick and efficient way of receiving an enhanced settlement payment
  • There will not be a requirement to become involved in formal procedures such as a capability, disciplinary or redundancy process which are time consuming, upsetting and could eventually result in your dismissal.
  • You will avoid the expense and uncertainty of issuing Employment Tribunal proceedings
  • You will have the opportunity to negotiate a suitable reference which will assist you in obtaining future employment.
  • An expert solicitor will check that the sum of money you are receiving is fair compensation and, if not, you will be provided with assistance to negotiate a higher sum
  • An expert solicitor will be able to advise of the risks in signing or not signing the settlement agreement

How much will it cost?

Normally your employer will agree to pay a fixed contribution towards the cost of you obtaining independent legal advice on the terms and effect of the settlement agreement.

In straightforward cases, this contribution should be sufficient to cover all of your legal costs.  We will always try and ensure that we keep our costs within this contribution.  However if this is not possible because amendments need to be made to the settlement agreement or because you want us to negotiate a higher amount of compensation on your behalf, you will be required to contribute towards your legal fees.  We will always endeavour to keep costs to a minimum.

What should I do next?

If you have been offered a settlement agreement by your employer and would like to talk this through with our legal employment experts please complete our online enquiry form on our website home page  or call us on 0800 118 1500 and we will be happy to discuss your options and guide you through the process.

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