If you are an employee and you have been offered a settlement agreement, it is vitally important you receive expert legal advice.
Our Employment Solicitors can guide you through your next steps and ensure you get a fair deal.
- What is a settlement agreement?
- Is a settlement agreement the same as redundancy?
- What is included within a settlement agreement?
- Do I need independent legal advice before I sign a settlement agreement?
- Why would my employer use a settlement agreement?
- I've been offered a settlement agreement - do I have to accept it?
- How can Smooth Commercial Law help me with settlement agreements?
If you have been offered a settlement agreement by your employer and need some legal advice, Smooth Commercial Law can assist. As specialist Employment Law solicitors, we are highly experienced in advising on settlement agreements and successfully negotiating terms for employees.
Settlement agreements are legally binding and can be used by employees and employers alike to solve a potentially fractious end of employment. They can, however, be a little complicated for both sides, and it is imperative that a set of procedures are followed to protect both the employee and the business from any potential further claim.
If you are an employee and you want our legal experts to scrutinise the settlement agreement you have been given, our expert team can help.
What is a settlement agreement?
A settlement agreement is a legally binding contract between you and your employer. The agreement settles any potential claims that you might have against your employer after the termination of your employment, thus meaning the company is protected from any tribunal claims down the line. There is usually an amount paid to the leaving employee.
Your employer will usually require you to keep the terms of the agreement, for example, the amount offered to you and the circumstances surrounding your contract’s termination, confidential.
Is a settlement agreement the same as redundancy?
No, settlement agreements and redundancy are slightly different. Someone being made redundant involves terminating a contract on reasonable grounds. In this scenario you would have no reason to bring a claim against your employer.
They are not mutually exclusive, however. If your employer decides to make you redundant, they can also offer you a settlement agreement. This may be offered in order so the employee can leave “smoothly”, and also to protect the company from any potential future claims that may arise.
What is included within a settlement agreement?
For a settlement agreement to be legally binding, there are certain requirements. The settlement agreement must:
- Be in writing
- State specifically what claims are excluded from being made once it is signed
- Be signed by the employee
- Must confirm that the employee has had independent legal advice from the legal advisor identified in the agreement
- State that all legal requirements have been satisfied
Every settlement agreement differs in nature due to every circumstance being different. Having said this, there are some things which are usually included. These are:
- Information surrounding termination payments
- References, if requested
- Information on the confidentiality clause
- A termination of employment date
- A waiver and settlement of employment claims
- Practical issues like handovers, resignation of directorship, return of property
Do I need independent legal advice before I sign a settlement agreement?
Yes – settlement agreements are not legally binding until you, the employee, has received independent legal advice about the agreement. Sometimes employers will agree to pay some of these legal costs, but it is not mandatory that they do.
If the settlement agreement is a little more complex, there may be more costs involved. However, it is worth getting the extra legal advice in the long run as it can lead to a better deal for the employee.
Why would my employer use a settlement agreement?
There are a number of situations where your employer might want to use settlement agreements. Their main use is to avoid a long and drawn-out process of performance meetings, disciplinary hearings and/or redundancy consultations. It also provides a “clean break” from you and the company, giving closure to you both.
Below, we list a few examples of when your employer might want to use a settlement agreement:
- A job is now redundant due to a downturn in business, but your employer wants to avoid the long process of redundancy. A settlement agreement can be a quick and clean way of terminating employment
- Your employer has evidence that an employee has committed gross misconduct. To avoid lengthy employment tribunals, the employer offers to let the employee leave quietly so they do not have to go through hearings and risk a dismissal on their record.
- An employee has evidence that the company has dismissed them unfairly, which the employer disputes. This can be settled outside of court at a fraction of the value of the claim via a settlement agreement
I’ve been offered a settlement agreement – do I have to accept it?
No, settlement agreements are not compulsory. However, depending on the circumstances, your employer may be able to sack you fairly anyway. It is always worth discussing a settlement agreement with a solicitor before turning it down, as they may advise that you might not be awarded as much should you proceed with an employment tribunal claim.
How can Smooth Commercial Law help me with settlement agreements?
Settlement agreements can be particularly appealing to employees who are looking for a “clean break” from an employer, whilst also being awarded payment in the process. They can, however, be relatively complicated, and if you don’t receive proper legal advice you could be getting a bad deal.
Our team of Liverpool, Manchester, St Helens and North West Employment Law solicitors can help employees who have questions around settlement agreements, and scrutinize the small print to ensure that you are getting a fair deal with no loopholes.
If you have any questions about settlement agreements, their uses, or their potential pitfalls, you can contact our experienced settlement agreement solicitors by calling 0800 046 9976 or by emailing email@example.com. You can also contact us through our enquiry form here.
Contact Smooth Commercial Law
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👨💼 Louise Lunt, Director, Smooth Commercial Law