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Settlement Agreements

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Has your employer offered you a Settlement Agreement?

We know that being offered a Settlement Agreement is scary. It often involves the termination of your job, which can create uncertainty and considerable worry about the future. We understand how devastating it can be to be the victim of discrimination or to lose a job that you have worked long and hard for.

It might have come completely out of the blue, perhaps there is a redundancy, or your employer wishes to buy-off employment procedures. Or, perhaps it has come at the end of a bruising dispute. Whatever your situation, our lawyers have advised hundreds of employees who have been in a similar situation to yourself, and we will be with you every step of the way.

In our view, it can often be in an employees’ interest to at least consider accepting the Settlement Agreement. If an employer is determined to behave in a certain way, it is often in your interests to see if adequate terms can be agreed to avoid the need to litigate. The sad reality is that litigation can often be uncertain, take a long time, and can cost a lot in terms of time and resources. We will advise everyone on their own circumstances including whether the offer is a good deal and if the terms are acceptable.

If the deal is not adequate, or the terms are unacceptable, our lawyers are tough and robust litigators and are able to support you through litigation should it not be possible to negotiate adequate terms with your employer.

If you need help with a Settlement Agreement, please get in touch today by filling in our contact form or calling the office on 0207 538 4909.

What is a settlement agreement?

A Settlement Agreement is a legal document that an employer may offer its employee to record the terms upon which your job and/or a dispute with your employer is going to come to an end. 

As an employee you will have a number of statutory rights, such as national minimum wage, rights to rest periods and holidays as well as rights not to be unfairly dismissed or discriminated against. You cannot just agree with your employer to give up those statutory rights; since that would make the law completely ineffective. However, the law does recognise that there are some circumstances in which it is beneficial to both parties to limit your statutory rights. An example might be where your employer accepts they have unfairly dismissed you and whilst you have started a claim in the Employment Tribunal, neither of you want to continue with it since your employer is willing to pay you adequate compensation.  

What makes a settlement agreement legally binding?

Since a Settlement Agreement usually seeks to limit your statutory rights, it will not be effective unless: 

  • There is a particular dispute that the employer and employee wish to settle 
  • The Agreement is in writing 
  • The employee gets independent legal advice on the terms and effect of the agreement 
  • The independent legal adviser is insured or indemnified against the risk of giving negligent advice 
  • The independent legal adviser is identified in the Agreement 
  • The Agreement states whether the conditions regulating Settlement Agreements are met 

Who is an independent legal adviser?

A legal adviser is specifically a qualified solicitor or barrister, a trade union official or a person who gives advice by an advice centre and is certified as competent to do so. Our advisers are qualified and experienced solicitors. Our solicitors are independent as they have no affiliation with your employer or anyone else who works for your employer. We will always only advise you on the basis of what is in your best interests.

What terms are usually included in a Settlement Agreement?

Most employers use the same “off the shelf” templates which can be obtained from a handful of places. As such, many of the Settlement Agreements we see are written in very similar terms and a large portion of them are not tailored to individual circumstances. We routinely see clauses such as:

  • Creating a clean break for the employer; this can include settling a dispute and/or ending a job
  • Various payments to be made by the employer to the employee, such as: wages, notice, holiday, bonuses and ex gratia compensation payments. These clauses may also include details of how any sums you owe to your employer is going to be dealt with.
  • An explanation of how your employer believes your payments are going to be affected by tax
  • Either to give up or promise not to start grievance, subject access requests, appeals and/or Court or Employment Tribunal proceedings
  • Require that neither the employer or employee bad mouth each other, or (ex)colleagues
  • Require confidentiality over the circumstances leading to the Settlement Agreement and the terms of the Settlement Agreement itself; with limited exceptions
  • A requirement to return company property and information
  • A requirement to keep confidential any confidential information belonging to the employer; this may include a requirement to delete any company information that is contained on personal devices
  • A standard reference that will include job title, dates of employment and salary
What should I make sure is included in my Settlement Agreement?

Usually, the standard wording provided by the employer is sufficient, but it may be worth considering the following:

  • Is the deal adequate to cover your financial interests and losses. For example, does it cover the financial value of the different benefits you get at work, are you getting at least the minimum statutory payments (e.g. in relation to wages, holiday, notice, redundancy etc) and are you getting sufficient compensation for your loss of earnings and/or injured feelings?
  • A standard reference is what is provided in most cases. Are there factors or circumstances relative to your situation which would make it difficult to get another job with only a standard reference?
  • Will you have to continue working with your colleagues and/or are you likely to encounter them during your career? Is it worth agreeing the wording of an announcement to be sent to your colleagues to explain what has happened?
  • In limited circumstances, it may be appropriate to consider whether your employer should also agree to give up any claims it has against you; in addition to your promise to give up any claims that you have against your employer. This may be particularly relevant if your employer has made any allegations against you such as negligence or theft.
Will I be required to keep the Settlement Agreement confidential?

Yes, it is normal for employers to want their employees to keep confidential both the circumstances of the dispute and the terms of the Settlement Agreement. However, there are some circumstances in which you cannot be expected to keep confidentiality, and these are usually listed in the Agreement. It is important to consider whether there are any other circumstances in which you need to be able to freely talk about what has happened and get these included in the list of exceptions to confidentiality.

Do I have to accept the Settlement Agreement?

No. You never have to accept a Settlement Agreement. If you wish to move on without a settlement or if you want to litigate you can do that instead of accepting the Settlement Agreement. We are happy to advise on all options that are available to you. 

What are the prospects of getting a better deal?

The value of the deal and whether you can get a better deal hugely depends upon the circumstances. An example of factors that can affect this include:

  • How fair and reasonable your employer is. Some employers choose to take a hard line; it is also these employers that often find themselves in litigation.
  • How strong is your case? How high are your losses? How great is the risk for each party?
  • What stage is your case at? Many employers are keen to settle at an early stage, but this often does mean a lower value settlement given that there would be considerable future risk for the employee. Employers are often willing to offer much higher levels of compensation once Tribunal proceedings have been advanced; but this is of course much more dependent on being able to evidence merits.
  • The resources your employer has – including the availability of legal advice as well as the pot of money that you’ll be paid from.
  • How much you earn(ed) in your job. A lot of the compensation that a Tribunal can award is calculated by reference to what you earn(ed). When you see cases report where employees are awarded millions of pounds by the Tribunal, it is most often the case that those individuals had very high salaries to start with.
  • Being amicable and being viewed as a valuable employee can impact to a lesser degree.