Settlement Agreements
So you’ve received a settlement agreement from your employer: what now?
A settlement agreement is a legally binding contract made between an employer and employee. They are normally used where there is an employee/employer dispute and/or to terminate a contract of employment.
The point of a settlement agreement is to resolve all the issues between the parties by agreement so that everyone involved knows where they stand and so that no further action can be taken by either party against the other in respect of the employment relationship. In other words, it’s a clean break between the parties.
What should you do when you receive your settlement agreement?
You will need to check the agreement very carefully. A settlement agreement must comply with certain rules in order to be binding. It should also clearly set out a number of key areas such as when your employment ends, how much money you will receive (including redundancy, holiday pay, bonus payments, the treatment of shares, etc.), whether your employer will provide a reference and what you are allowed to say about the issues involved and the ending of your employment. The agreement will also bring to an end some of your employment rights such as the right to pursue certain statutory claims for unfair dismissal, discrimination or breach of contract.
Do I have to take legal advice?
Yes, you do. A settlement agreement in which you agree to waive your right to bring a claim/s against your employer will not be legally binding unless you have received independent advice from a solicitor or certified trade union representative. The agreement must also identify that adviser, and their advice must be covered by insurance.
In any event, it is also important to ensure that the agreement is fair and that you fully understand the implications of what you’re agreeing to and what you can or cannot do once you’ve signed. For example, there may be a clause in it preventing you from discussing the issues you’ve had with your employer with other people. This can be a complex area where it is essential to have a clear understanding of what you can say and to who.
Does a settlement agreement have to be in writing?
Yes, in order to be legally binding it must be in writing.
Do I have to sign it?
No. You don’t have to sign it. But once again, it is important to take independent advice about whether you should or should not sign it. Knowing when to accept an offer can be difficult and it can be hard to be objective if you’ve been embroiled in an emotional situation. But you don’t want to prolong proceedings with your employer if you have no prospect of getting a better deal than is on offer.
Equally, if you have a really strong prospect of achieving a much better deal than that which is on offer or there are other more complex issues involved, it may not be right to sign the agreement.
Just because you don’t sign, does not necessarily mean that matter will have to be decided by a Tribunal. This will depend on the circumstances and what stage you have reached (some settlement agreements are agreed and written at the courtroom door) but normally you or your solicitor will continue to negotiate on your behalf with a view to trying to reach an agreement.
If you would like to discuss settlement agreements or employment issue, please get in touch.
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