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For a settlement agreement to be legally-binding it must meet certain statutory requirements. These make it valid as a contract between parties. But the employee signing a settlement agreement must also have proper legal advice beforehand.
An independent solicitor or lawyer must make the written agreement, and put their name to it, as well as advise the client who is signing it.
Statutory Requirements for a Settlement Agreement
The statutory requirements that ensure a settlement agreement is a legally-binding contract are:
- The agreement must be written down
- It must relate to a specific complaint or proceedings
- An independent lawyer must make it, and include their name in it.
- The written agreement must set out what it intends to do
- It must state that it meets the statutory requirements that cover it
Without meeting these requirements, the settlement will not be a valid, which can have consequences for the parties involved.
Why are these Requirements Important?
A settlement agreement is so named because it settles any claims an employee has against their employer. Its most common application is to bring a period of employment to an end.
It allows the employer and employee to agree how this happens.
Typically, the employee makes a settlement payment to the employee, and in return, the employee waives any rights to making a claim against the employer.
But if the settlement agreement does not meet statutory legal requirements, in theory, the employee could still make a claim, making the agreement ineffective.
Meeting these requirements is important then, but so is drafting the contents of the agreement. This is where the solicitor’s role is crucial.
What is the Solicitor’s Role in Settlement Agreements?
A common misconception is that the solicitor’s role in settlement agreements is simply to include their name in the written document and to witness their client’s signature.
It is also part of a settlement agreement that the client must receive independent legal advice. The solicitor’s role is pivotal. They should advise their client about the contents of the proposed agreement, including its terms and conditions.
The terms of the agreement are critical. They need to be clear because they will ensure that the agreement works as a form of mutual resolution for the employer and employee.
The terms should include:
- The amount of compensation payable
- Clauses that prevent the employee making a claim
- Other conditions, such as non-disclosure clauses
Settlement agreements may involve legal language and phrases, and the solicitor will need to ensure their client understands clearly what these mean.
Also, any discussions involving the parties to settlement agreement must meet legal requirements too. If this is not the case, these discussions could become evidence in any legal proceedings, should the agreement not go ahead.
Helps and Support for Settlement Agreements
For more information about settlement agreements, or our other business law services, please call 0800 088 6004, or complete our online contact form, and we will be in touch as soon as possible.