What to do with a Settlement Agreement?
16 April 2021 by Billy Smith
There are various reasons why a settlement agreement may be offered to an employee to terminate their employment.
There may be a disagreement or impasse between employer and employee over some employment-related issue. There could be a redundancy situation that arises or a technical or reorganisational reason why employment is being considered for termination. Capability and conduct reasons may also feature in the rationale for considering termination, as could disputes over pay, trade union action, or discrimination. The list of reasons why settlement agreements are proposed is vast.
The terms of the settlement agreement can be mutually agreed between the employer and employee. Those terms will then be set out in a written settlement agreement document, which will identify the claims which the employee agrees not to pursue in exchange for the agreed payment.
Any settlement agreement used should be customised for the specific employee and their individual circumstances. They must include a clearly expressed waiver of the specific claims which the employee has or could feasibly have.
Fisher Jones Greenwood Solicitors can help you understand the terms and effect of these complicated legal documents to help convey what rights and obligations are incorporated and assist our clients with weighing up the worth of the proposed settlement. This helps with and can lead to further negotiations or tailor making the agreement.
What is a Settlement Agreement?
A settlement agreement, which was formerly referred to as a compromise agreement, is a legally binding contract between employer and employee.
These agreements can be used in many different situations and typically incorporate terms upon which termination, waiver, and discharge of employment claims can be achieved.
Most settlement agreements offer a severance payment in return for an employee’s agreement not to pursue any legal claims at an Employment Tribunal or court. In addition, these settlements will likely include that their terms are kept confidential.
It is a legal requirement that the requirements of settlement agreements contained in s 203 of the Employment Rights Act 1996 are satisfied. One such requirement is that employees considering settlement agreements must be advised by a ‘relevant independent adviser’ such as a Solicitor.
Why Settlement Agreements are used?
Employers often use settlements when they want to end a contract on mutual terms with employees.
A situation in which one might consider using a settlement agreement could be where an employee is not performing well and neither party wants to go through a long capability process, and both employer and employee are willing to bring the employment to a quick end on agreed financial terms.
There is a clean break after the agreed termination date and most, if not all, claims fall away from the employee in relation to that employment.
Essentially, these agreements are used as a way to protect employers from having to face future legal action after termination. Employers may use settlement agreements to avoid long, complicated processes before achieving termination. Employers may also offer settlement agreements in situations where disciplinary or grievances have started, or where there are issues involving unfair dismissal or discrimination.
Settling claims early on mutually agreeable terms can substantially mitigate the costs outlay for both sides if matters would otherwise have become litigious.
I have been offered a Settlement Agreement; what do I do next?
Employers may present employees with a settlement agreement rather suddenly, leaving little time for consideration over whether termination is the right thing to accept. Time should be afforded to employees to consider their position though and be legally advised. Settlement agreement documents can be written in a legalistic way which make the terms and effect of clauses therein difficult to understand and interpret.
We encourage employees to do the following if offered a settlement agreement:
- Don’t Sign Anything immediately: Your employer may present you with a settlement document unexpectedly, but you shouldn’t just sign it immediately. Tell your employer you want time to consider all of the terms of the agreement and make sure you have a copy of the draft contract.
- Call a Solicitor: Contact a Solicitor with experience in Employment Law. They will be able to help you understand the contract and advise you as to how to proceed. A Solicitor can be retained to represent you in any negotiations with your employer about the terms contained in the agreement and can help employees understand the value of their potential claims.
Determine If the Settlement is Fair: A Solicitor will be able to help you determine if the settlement your employer is offering is fair. They should take into account the amounts offered against the worth of any existing or prospective claims. If the offer seems unfair, your solicitor can help you negotiate. They can also help you build a case to institute at the Tribunal or at court.
Why do I need a Solicitor?
It is important to speak with a Solicitor when in receipt of a settlement agreement because they will be able to help determine if the offer is fair.
An Employment Solicitor will be able to advise on the merits of claims and help to quantify any likely award of damages and advise on any other reliefs that may be available. A Solicitor will also be able to help identify any discrimination issues too. Such claims can be very complex and require expert knowledge about the operation of anti-discrimination law for claims to be understood and /or articulated properly. If you were dismissed unfairly due to discrimination or illegal practices, we can represent you.
Contact Us Today
If you are looking for an experienced Solicitor that can help you navigate your settlement agreement, we would be pleased to assist you. Fisher Jones Greenwood Solicitors can help by providing legal advice and representation for the full gamut of employment disputes and we advise settlement agreements. Please contact us today for additional information or to schedule a consultation, call 01206 700113, or email [email protected].
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