Employment Settlement Agreements


Support on Employment Settlement Agreements

If you are severing ties with an employer, it is important to consider getting legal advice from solicitors with experience in Settlement Agreements.

By partnering with Andrew & Andrew Solicitors, you are able to make use of nearly 70 years of experience from solicitors that successfully deliver for clients all over the South coast and beyond.

How it works

In exchange for a removal of giving up claims against the employer, a severance Employment Settlement Agreement outlines the conditions of an employee’s departure, including the compensation to be provided to the employee.

We are here to advise upon the terms and effect of the Settlement Agreement to help ensure you get what you are owed, and create positive conditions for you as you exit a company and establish whether a better outcome may be achieved.

Employment Settlement Agreements FAQs

A settlement agreement is a legally binding contract between an employer and employee. Typically, the employee accepts a monetary settlement in exchange for agreeing not to bring or continue legal claims against the employer and waive the right to bring a claim against the employer in the future.

Settlement agreements are commonly used to end an employee’s contract of employment on agreed terms, but they can also serve to settle a dispute in a continuing employment relationship.

For the settlement agreement to be legally binding, the employee must receive independent legal advice before signing the agreement in order to understand the terms of the agreement and its effects upon their ability to present a claim to an employment tribunal.

The employer would usually contribute towards the cost of the independent legal advice.

If you’ve been offered a settlement agreement by your employer, book an appointment to speak to our expert employment lawyers for quick, effective advice on the term and effects of the agreement.

According to ACAS guidance, employers should give employees a minimum of 10 calendar days to decide whether they want to accept a Settlement Agreement and should not insist that the Agreement be signed straight away.

If you have been absent from work due to a terminal illness, you are protected against disability discrimination under the Equality Act 2010, but there may be occasions when you can no longer work in your current role due to the decline of your health. In such circumstances, you could negotiate a settlement agreement as an alternative to bringing a disability discrimination claim against your employer.

Seeking legal advice before signing a settlement agreement is an essential requirement. Our employment law specialists will advise on whether the terms are fair and reasonable and can assist in negotiating terms.

It is an ACAS requirement that for a settlement agreement to be binding and enforceable, the employee must have received advice from an independent qualified lawyer, certified trade union official or advice centre worker.

Advisers must be covered by professional indemnity insurance and should be specialists in Settlement.

The Settlement Agreement should normally cover the cost for a solicitor to advise upon and sign the agreement – usually in the region of £350.00 to £500.00 +VAT.

On occasions your solicitor can negotiate a higher fee contribution from the employer if amendments to the settlement agreement are necessary, sometimes including an increased settlement amount. However, usually an employer will not contribute to fees to simply negotiate a higher level of compensation and expect the employee to cover any such additional costs.

Your solicitor will explore with you the background to you being offered the Settlement Agreement and whether you may have an alternative or better claim.

Invariably, settlement agreements are written in some legalistic language, so your solicitor will be able to explain the legal ramifications of signing a Settlement Agreement, for example, the legal warranties you are entering into, such as a confidentiality clause, and the penalties for breaking any of them.

This will depend on the circumstances surrounding the offer of the Settlement Agreement. We will discuss the background with you to find out what potential claims you may have against your employer, how strong they may be, and their likely value.

This is in order to establish whether the sum offered compensates you sufficiently for the legal rights that you are giving up. Another consideration in deciding whether to accept an offer is how quickly you think you will find another job. This is because any compensation that you might receive in an Employment Tribunal would be based on your actual loss of earnings.

Generally, the first £30,000 of compensatory (non-contractual) and ex-gratia payments are exempt from tax. However, all salary and benefits paid up until the contract of employment ends are subject to tax and National Insurance, as are payments in lieu of holiday and payments in lieu of notice.

In most situations, the existence of a Settlement Agreement will not have a great deal of impact on you securing another job. However, some agreements may contain ‘restrictive covenants’, that prevent you from working for a competitor for an agreed period of time. If such restrictive covenants mean that you are unable to work in your sector for a time, the settlement figure should account for the loss of income you would suffer.

Usually, a Settlement Agreement will contain a clause providing for your current employers to provide you with a satisfactory reference. However, as this is not a legal requirement, it is important to ensure such a clause is included. Often, a reference merely provides the employee’s job title and dates of employment, so if an enhanced reference is important to assist with finding alternative work, this can be negotiated as part of your Settlement Agreement.

If you decide not to sign the agreement, your lawyer can advise you of the consequences, which may include termination of your employment. You should also be aware that your employer will not make a contribution to your legal fees if you do not sign the agreement.

If you choose not to sign your settlement agreement and wish to pursue a legal claim against your employer, there are strict time limits to do so. The time limit to issue a Claim Form is usually three months, less one day, from the date your employment terminated, but you may need to lodge a claim sooner if, for example, you complained of unlawful discrimination before your employment ended.

To pursue a claim, you will first need to notify ACAS, who will offer early conciliation to try to resolve the dispute. If the claim does not settle, ACAS will issue a certificate to confirm that the mandatory conciliation process has concluded.

For advice about pursuing a claim against your employer, talk to our specialist employment lawyers.

A Settlement Agreement is legally binding, and there are serious implications if the terms are breached.

If your former employer has not paid any of the compensation set out in the agreement, you will be able to enforce the payment terms. The remedy for other breaches will depend on what type of breach there has been and the evidence you have to support your claim. You should consult the solicitor who signed off the agreement to enforce the terms of the payment.

If an employee has breached any of the material terms of their contract, the employer may be able to recover some or all of the money paid to the former employee as a debt.

If you are concerned about one of the parties of a Settlement Agreement breaking the agreement, it is important to seek expert legal advice.

The “without prejudice” rule allows you and your employer to speak and write openly about settlement terms without compromising your case or their defence. This also means that these negotiations are confidential unless you and your employer agree that they are not.

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Need guidance on a severance agreement on Employment Severance Settlement Agreement? Contact us directly using the link below and start your journey to an amicable agreement.

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