Settlement agreement solicitors

A settlement agreement is a legally binding contract that typically seeks to end an employer-employee relationship with the waiver of statutory and contractual employment law claims. It is often used when an employee is dismissed or made redundant, but they can be used while an employee is still employed, depending on the circumstances.

Employment law rights are complicated and can only be legally waived in two ways. While an employee can waive their employment rights via ACAS and their ‘COT3’ settlement terms through early conciliation, a settlement agreement is the far more commonly used option.

Yes, for the settlement agreement to be effective, the employee waiving their rights must be independently legally advised on the legal rights they are waiving and, on the terms and effect of the settlement agreement they are entering into. If not, the settlement agreement is not legally binding.

Yes, an employee can request a settlement agreement if they want to leave their job on agreed terms or resolve a dispute without going through a formal process, however the employer doesn’t have to agree.

If either side breaks the terms of the settlement agreement, it may be possible to seek repayment, injunctive relief or damages. We can advise you on enforcing or defending breach claims.

The benefits of a settlement agreement for an employer include:

1. Saving time and money

Settlement agreements can help employers sidestep lengthy and costly procedures that could tie up internal resources, such as an employment tribunal or court case.

2. Achieving a clean and final break

When it’s clear that the working relationship is no longer viable, a settlement agreement provides a way to end it amicably and conclusively, reducing the risk of future litigation.

3. Managing an exit more efficiently

In cases of redundancy or where there are ongoing concerns about an employee’s conduct or capability, a settlement agreement can offer a faster and more discreet alternative to formal disciplinary or redundancy procedures.

4. Resolving disputes discreetly

If there is a grievance, workplace investigation or the potential for litigation, a settlement agreement can help resolve the matter discreetly without setting a precedent or escalating the dispute.

1. Providing some certainty

A settlement agreement usually comes with a financial package that can provide immediate financial support and a degree of stability, particularly when leaving a role unexpectedly.

2. Avoiding more formal procedures

A settlement agreement can provide a way to avoid the stress and uncertainty of disciplinary hearings, redundancy consultations or legal disputes.

3. Achieving a dignified exit

A settlement agreement can allow the employee to move on without stigma or drawn-out proceedings, often with a reference and confidentiality in place to protect future job prospects.

A settlement agreement can include many things depending on your role, responsibilities, remuneration arrangements and incentives. For example:

• Pay in lieu of notice (PILON)
• Bonuses
• Share options
• A reference
• A mutually agreed leaving statement
• Waivers or amendments to restrictive covenants in your employment contract
• Protection against derogatory comments
• Rights to company property e.g. mobile number, company car, laptop etc)
• Extension of certain benefits after termination such as health cover
• Outplacement support