When your job is in jeopardy, or you are being made to feel uncomfortable at work, it can be both lonely and stressful, for you and those around you. In those circumstances, you need support and practical, decisive advice on your employment law rights and the best way forward.

What is a Settlement Agreement?

A Settlement Agreement is a voluntary legally-binding written contract, where an employer terminates employment with an employee on mutually agreed terms. As the redundancy process can be complex and timely, employers often offer an enhanced payment in a Settlement Agreement as an alternative way to end the employment relationship swiftly. Settlement agreements can also be used to terminate employment during an ongoing claim in a court or employment tribunal.

As well as agreeing the terms of financial compensation, Settlement Agreements can also include terms to protect the business’s reputation including confidentiality and non-derogatory comments clauses. Terms that restrict the employee’s activities for a period of time are also common to stop employees setting up in competition or taking business away from the employer.

Waiving rights to future employment claims

It is important to note that whilst a Settlement Agreements financially compensate an employee it also limits the employer’s liability, so that a line a “clean break” is achieved. So once signed, the employee is agreeing not to pursue any future employment claims listed in the Settlement Agreement, such as unfair dismissal in an employment tribunal.

Requirement for legal advice paid for by the employer

For a Settlement Agreement to be enforceable it is a requirement that the employee receive legal advice, from an independent solicitor of their choice, on the terms and effect of signing and where appropriate the legal adviser may also negotiate the terms on their behalf. This legal advice is normally paid for by the employer in terms of a financial contribution. A contribution of between £250 and £500 is common. However, if your situation is complex, it is sometimes worthwhile paying any additional legal fees yourself to achieve a better deal.

Do I have to accept a Settlement Agreement?

You don’t have to accept a Settlement Agreement but if you turn down the offer, you might not get a better one. A solicitor will be able to review the terms in the Settlement and advise you about what would be reasonable in your circumstances.

On your side

It is important that if you are asked to sign a Settlement Agreement that you clearly understand the terms and what you are agreeing to. I can offer advice on whether the settlement proposed is reasonable in light of the background to the termination of employment and can negotiate the terms and financial settlement on behalf of the employee.

If you would like more information on Settlement Agreements or wish to have one reviewed by a solicitor to check it is fair, please contact me on 01724 642 842 or [email protected]