If you need independent legal advice on a settlement agreement, contact us today and we will put you in touch with a qualified lawyer in our employment team who will be able to help you. Contact us on 02920 829 100 or by using our online contact form here.
A settlement agreement is a type of contract that settles potential Employment Tribunal claims that an employee or former employee can bring against an employer or former employer. Often, a settlement agreement will also document the termination of an employee’s employment contract with his or her employer (by setting in writing a termination date). A settlement agreement will usually include a settlement payment being made from employer to employee in return for the settlement of all employment claims (including statutory claims, future claims and existing personal injury claims).
Before you can sign a settlement agreement, the Employment Rights Act 1996 says that an employee must first obtain independent legal advice from a qualified solicitor or a certified trade union representative on the terms of the settlement agreement. Only once a settlement agreement has been signed and advised upon by a qualified solicitor does a settlement agreement then become a legally binding contract. It is advisable that both the employer and employee get advice on any settlement agreement they enter into.
If you have been given a settlement agreement to sign, your employer will probably have given you a deadline by which to sign the settlement agreement. If so, it’s important that you obtain independent legal advice on the settlement agreement as soon as possible so that you have enough time to consider the terms of the settlement agreement and whether you would like to negotiate further with your employer about the
To get to the point of being able to say that you have received independent legal advice and that you have a legally binding agreement, you will need legal advice on the terms of the settlement agreement. The vast majority of settlement agreements will contain a clause providing that the employer will make a contribution towards the legal fees of the employee in obtaining advice on the settlement agreement. Generally speaking, this contribution will be around £500+VAT. As long as your settlement agreement is a straightforward one, this legal fee contribution may be enough to pay for the legal advice on the settlement agreement. If your settlement agreements is more complex, or you want a solicitor to negotiate the terms of your settlement agreement with your employer, our solicitors will always be able to give you a quote for the settlement agreement work involved.
The main role of a settlement agreement is to settle any Employment Tribunal claims (such as claims for unfair dismissal, discrimination, whistleblowing, accrued pension rights or breach of contract). Your independent legal adviser will be able to advise you whether they think you have any potential claims in the Employment Tribunal against your employer. If you do, often the threat of such claims in the Employment Tribunal will be used as a bargaining tool as part of negotiating the terms of any financial compensation under the settlement agreement.
By signing a settlement agreement, an employee is settling any employment dispute that he or she has against his employer. This includes any claim in the Employment Tribunal for discrimination under the Equality Act. This therefore makes getting legal advice on such an agreement even more important; because signing a settlement agreement involves compromising significant employment law rights.
It is very common for a settlement agreement to contain clauses saying that you will keep the settlement agreement confidential. As such, confidentiality clauses are very common in any settlement agreement. In reality, an employee’s employment contract will usually already have confidentiality clauses within it anyway, so often the settlement agreement will just be reinforcing those confidentiality clauses and also introducing some extra confidentiality clauses to do with keeping the terms of thee settlement agreement itself confidential.
Often a settlement agreement will include an agreed reference which can be provided to any prospective employer upon request. Indeed, a future reference is often a really important feature of a settlement agreement. Whilst the most common form of reference included in a settlement agreement will be a standard factual reference (containing simply dates of employment and job title), it is possible for a settlement agreement to contain a more favourable reference than this; for example one that says something positive about the employee. The inclusion of a reference is often one of the more important non financial terms contained in a settlement agreement.
Usually yes. An entire agreement clause is one of the most common types of clauses seen in a settlement agreement. The effect of such a clause is that an employee signing a settlement agreement should only rely on the legally binding terms actually contained in the settlement agreement itself, and nothing outside which falls outside the terms of the settlement agreement (such as an verbal promises made to the employee).
One of the more technical points covered in a settlement agreement will be around the issue of post employment notice pay. Any notice period payment made to an employee under a settlement agreement must be subject to deductions for tax and national insurance contributions. As such, a settlement agreement will almost always deal with the issue of notice in it main terms. Elsewhere, a settlement agreement will usually deal with lots of the practical aspects of employment termination and end of the employment relationship; such as return of company property and holiday pay.
Signing a settlement agreement should not prevent an employee from seeking or obtaining future employment. In reality, a settlement agreement is a clean break from an employee’s contract with his or her old employer, so an employee is then free to obtain employment elsewhere.
Compromise agreement is the old name that was previously used for a settlement agreement. From now on however, every such agreement should be called a settlement agreement. However, you will still find some employers using the old terminology. In reality though, they mean a settlement agreement.
Constructive dismissal is where an employee says that their employment has become untenable (e.g. because they say that there has been a fundamental breach of their employment contract) and that they are therefore forced to resign and bring a claim against their former employer. In an employment context, constructive dismissal claims can be challenging types of legal action to bring and defend. Often, workplace disputes and settlement discussions leading to a settlement agreement being signed will involve arguments relating to constructive dismissal. In reality, nobody wants to end up in a Tribunal hearing. As such, a settlement agreement will hope to achieve the clean break between the parties.
Resolving disputes is fundamental to the concept of a settlement agreement. A settlement agreement can therefore play an important role in resolving tricky employment situations, such as where an employee is on long term sickness absence or has an outstanding grievance with his or her employer. A settlement agreement curtails an employee’s ability to bring a claim against their employer, so settlement agreements become really key factors in the areas of workplace conciliation and labour relations.
A settlement agreement settles all potential claims between employer and employee. However, a settlement agreement will not become effective until an employee agrees to its terms and an employer agrees to its terms. If talks with the other party breaks down and no settlement agreement is signed, an employee if technically free to pursue any claims that it wants against his or her employer or former employer.
Yes. A settlement agreement cannot settle claims brought by an employee to enforce the terms of the settlement agreement itself (usually a breach of contract claim in the event of non-payment of the settlement payment by the employer). Also, a settlement agreement cannot settle claims for accrued pension rights or for personal injury claims the employee is not aware of at the date of signing the agreement.
You need a solicitor who is qualified to advise on your settlement agreement, who is regulated by the Solicitors Regulation Authority and who has professional indemnity insurance in place. All of our solicitors tick these boxes and are highly skilled and experienced at handling settlement agreements and negotiating settlements as part of settlement agreement discussion.
It is a legal requirement to get independent advice on a settlement agreement. Indeed, a settlement agreement’s validity is dependent on having received advice on the terms of that settlement agreement. To discuss a settlement agreement today therefore, contact us on 02920 829 100 or by using our online contact form here.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
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