What is a Settlement Agreement?
A settlement agreement is a legally binding contract between you and your employer that can resolve potential employment disputes without the need for tribunal proceedings. Settlement agreements were formerly known as compromise agreements and represent one method of resolving employment-related claims that may arise during or on the termination of your employment.
The potential advantages of reaching a binding settlement agreement include that no involvement by Acas or any other external body is required, and the settlement agreement will be a free-standing, enforceable agreement between the parties that may be enforced through the courts much like any other contract. It may be particularly useful where proceedings have not yet been issued or the dispute between the parties may not even have arisen, for example where an employee and employer negotiate and agree severance terms instead of a contemplated dismissal.
For a settlement agreement to be valid and legally binding, there are specific legal requirements that must be satisfied. The agreement must be in writing and must relate to the particular proceedings and, most importantly, you must receive advice from a relevant independent adviser as to its terms and effect and its effect on your ability to pursue your rights before a tribunal. There must be relevant insurance in force covering the risk of a claim by you in respect of loss arising as a result of the advice, and the agreement must identify the legal adviser and state that the statutory conditions have been satisfied. The requirement for independent legal advice is fundamental to the validity of any settlement agreement. The agreement itself may be difficult for a lay person to decipher. We will explain, in easy to understand language, the full implications of the agreement so that you fully understand what rights you may be giving up by entering into the settlement agreement.
Many settlement agreements include confidentiality provisions requiring you to keep the terms and existence of the settlement agreement confidential If such provisions are included, you may wish to ensure that this obligation is reciprocal, either in the interests of fairness or privacy, or because you have a specific concern We can negotiate appropriate terms regarding confidentiality that protect your interests.
The employer should give you adequate time and opportunity to obtain advice or support during this process. You should not feel pressured to sign any agreement without first obtaining proper independent legal advice and fully understanding its implications.
We Can Help
If you are considering entering into a settlement agreement, we strongly recommend that you speak with us first. We will review the specific terms being offered and advise you on whether the agreement is in your best interests. The cost of this advice is usually covered by your employer as part of the settlement terms. We will also advise you on whether the sums offered appear to be fair and reasonable or require re-negotiation.
Please call us now on 01926 699269 if you require any clarification on these matters or if you would like us to review an agreement for you.