What are they?
A Settlement Agreement is a legally binding agreement between you and your employer.
They are commonly used to record the terms on which the parties have agreed to end (settle) an employment dispute.
Once completed, the promises contained in a Settlement Agreement have contractual weight. This means that if either side breaks these promises, the other can take legal action for breach of contract.
Most settlement agreements will contain terms that deal with:
- whether employment has ended or is to end
- any payments owed (accrued holiday pay, notice pay, expenses, pension, shares, options etc)
- any compensation agreed
- the end of any legal action and agreement that no future legal action will be brought
- confidentiality regarding the dispute and/or settlement terms
- how the parties are taxing any payments
- when/how property is to be returned
- the giving of references
- agreement not to make derogatory comments about each other
- whether any post termination restrictions apply
The payments and benefits under a Settlement Agreement are given in return for your agreement not to pursue any claims in a Tribunal or a Court.
To be a binding Settlement Agreement you are required to have received advice from a qualified lawyer or authorised member of a trade union on the terms and legal effect of the agreement.
Usually, but not always, your employers will provide you with the initial Settlement Agreement terms.
You do not have to agree these terms. Entering in to a Settlement Agreement is voluntary. Typically, the parties enter into a process of negotiation, making proposals and counter-proposals. If agreement on the proposals cannot be reached, there will be no settlement. If it can, a final version will be drawn up for signing.
The advantages of reaching settlement
Legal action, even if your case is strong, is never certain to succeed. By settling a dispute without going to trial, you avoid this uncertainty.
Providing the terms are satisfactory to you, Settlement Agreements can be a sensible way to end a dispute.
Who pays the costs of entering into a Settlement Agreement?
It is standard practice for your employer to pay a contribution towards your legal fees if negotiations are concluded by way of a Settlement Agreement. Typically, employers pay between £350 and £500 (plus VAT).
Where the issues involved are not straight forward you can reasonably ask your employer to increase their contribution.
Our employment lawyers are practiced negotiators and have substantial experience of advising on Settlement Agreements both for individuals and very large groups.
We will always ensure that the agreement matches your expectations and that you fully understand the terms. We frequently help people achieve significantly better offers. Wherever possible we recover full fees from your employer.
If you want advice about a Settlement Agreement you can telephone our employment team direct on 020 7653 3222 or email us firstname.lastname@example.org.