You may also have heard a settlement agreement called by its old name a ‘compromise agreement’. In short, it is a legal contract, often governing the end of the employment relationship with an employee or employer, although they can also be used to settle employment claims while in employment.

They can be used in multiple scenarios but common amongst them are to agree a mutual exit pending potential:

  • Disciplinary action;
  • Performance concerns;
  • As part of a voluntary redundancy process; and
  • Following a request by an employee.

What sets a settlement agreement apart from other legal contracts is that there are prescribed legislative requirements that need to be met for it to be a valid settlement agreement. If those requirements are not met the agreement might still be contractually binding in places but it would not settle the majority of statutory claims.

One of the prescribed requirements of a settlement agreement is that the employee needs to take advice on it from a solicitor or other named person as set out in the legislation and this is why an employee has to meet with a solicitor to take advice on the agreement.

This can be a worrying and frightening time for some employees, while others are happy with the deal they have been offered and want the matter dealt with as quickly as possible. Wherever you sit on this spectrum, the most important point to remember is that help is only a phone call away – contact James Monk (Director and Head of Employment Law) on 01384 447770 or email