Other sources of information: ACAS.
Reasons to choose Wilson Browne
- A review of the documentation ahead of the call and calculating entitlements etc.
- A detailed advice call when we go through:
- the background to how the agreement came about so we can advise on any claims you may have – from this you (and we) can then make a proper assessment of the sum on offer and whether it’s a good deal
- the alternatives – together with the pros and cons of those alternatives
- what the settlement agreement means and any changes we recommend
- A detailed advice letter confirming the key areas of advice given during the call and which clearly sets out the changes. This is designed to enable the client to have sufficient information to negotiate if they wish to do so themselves.
In simple terms, for an agreed sum, you and the employer agree to go your separate ways in return for a consideration (payment) made to you. The settlement agreement is binding and invariably means you give up any right to pursue any further claim in the future and to be bound by certain terms such as (but not limited to) confidentiality and to not make any negative comments regarding the (former) employer.
Sometimes the agreement will include other things of benefit to the employee, such as an agreed reference letter.
It could be that the relationship between you and your employer has broken down or become strained. We can help ease the pain during what can be a difficult time by liaising with your employer on your behalf. This means that if you wish, we can minimise any need for you to have direct contact with them. We can’t tell you whether to accept an offer or not – only you can make that decision, but we will support you through the process and can help negotiate on the terms of the agreement if necessary.
See our full guide below to Settlement Agreements
In what circumstances will a settlement agreement be appropriate?
An employee can make a claim against a business under both their contract of employment and under the statute. These claims may arise:
- on recruitment;
- during employment; or
- when their employment has been terminated.
Businesses can enter into an agreement with an employee to settle potential claims when they are still working for the business, but in most situations, their employment will have ended (or be about to end).
What are the legal requirements for a valid settlement agreement?
For a settlement agreement to be legally binding, there are a number of conditions that must be met:
- The agreement must be in writing.
- The agreement must relate to a particular complaint or particular proceedings.
- The employee must have received legal advice from a relevant independent adviser (for example, a qualified lawyer or union official) and normally the employer makes a contribution towards this cost. The advice should cover:
- the terms and effect of the proposed agreement; and
- its effect on their ability to pursue any rights before an employment tribunal.
- The independent adviser must have a current contract of insurance (or professional indemnity insurance) covering the risk of a claim against them by the employee for the advice.
- The employee’s adviser must be identified.
- The agreement must state that the conditions regulating settlement agreements have been satisfied.
Possible content of a settlement agreement
Other than the legal requirements listed above, the contents of a settlement agreement are largely at the discretion of the business and the employee involved. Examples of common clauses include:
- Compensation for loss of employment.
- Contribution to legal fees.
- Waiver of claims by the employee, including warranty that the claims listed are the only claims which the employee has against the employer.
- Re-assertion or modification of existing restrictive covenants.
- Indemnity from employee in relation to tax and National Insurance Contributions.
Protecting confidential information is usually crucial to a business and therefore settlement agreements often contain confidentiality provisions, for example, the employee agrees:
- Not to use any confidential information.
- Not to disclose any confidential information to any person, company or other organisation.
- To keep the terms and existence of the agreement confidential.
- To not make any derogatory comments about the employer (or any individuals employed by it) to a third party.
Which types of claim can be settled by a settlement agreement?
A large number of statutory claims can be settled by a settlement agreement, for example claims for:
- Unfair dismissal (see Termination of Employment).
- Pregnancy or maternity-related discrimination.
- Discrimination, victimisation or harassment related to sexual orientation.
Which types of claim cannot be settled by a settlement agreement?
There are a number of statutory claims that cannot be settled by entering into a settlement agreement, including some types of:
- Personal injury claims.
- Pension claims.
- Claims following the transfer of a business.
Settlement agreements can be an ideal way of an employee and employer parting company under sometimes difficult circumstances but should not be entered into without proper advice.
Other sources of information: ACAS