Employee Settlement Agreement

Employee Settlement Agreement

Formerly known as compromise agreements, a Settlement Agreement is a legally binding contract between employer and employee which settles claims that the employee may have against their employer. It usually means that the employee will give up the right to bring any kind of tribunal claim against the employer in return for a severance payment.

If you have been offered a Settlement Agreement by your employer, you must get independent legal advice. Otherwise, it’s not valid.
Our Employment Team are highly skilled with a vast range of knowledge and experience, get in touch with one of our Settlement Agreement Solicitors today to get the process started.

There are many differing names and terms to refer to Settlement Agreements these include:

• Termination agreements
• Compromise agreements
• Golden goodbyes
• Ex-gratia payments
• Gagging clauses
• Mutually-agreed resignation

However, the correct legal term is ‘settlement agreement’.

Do I need a Solicitor?

In short, yes. It is essential that the Settlement Agreement records all the specific relevant claims or complaints that the employee is waiving. Settlement agreements often state that they waive every employment claim that exists at law but without specifics this is unlikely to be valid.

The Agreement is only valid if:

• It is in writing
• Relates to a particular or potential complaint
• The employee has received advice from an independent legal adviser
• The legal adviser is identified and must be insured
• The adviser has signed the agreement or legal certificate confirming that advice has been given
• The agreement states that it meets the requirements of the relevant regulations

What are the benefits of a Settlement Agreement?

• You will receive a lump sum – up to £30,000 could be tax-free.
• An agreed reference will help you find work without the worry of what your employer might otherwise say.
• Everything is confidential. This keeps your reputation intact even if you were facing disciplinary action.
• You avoid the risk, expense, stress and delay of going to Tribunal.
• They offer a clean break for everyone.

A common misconception is that a Settlement Agreement will always result in the employment being terminated. This is not always the case and some employees may settle a dispute with their employer in this way and then remain in their employment.
For more information on Settlement Agreement or for specialist employment law advice, please get in touch.