Settlement agreements are often a quickfire and effective way to resolve disputes between employer and employee. Sara Marshall, head of employment law at Franklins Solicitors, looks at how they work and the benefits to both parties.
Sara Marshall
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A SETTLEMENT agreement is a written agreement between an employer and employee (or former employee) in which the employee agrees they will not refer a specific matter or matters to an Employment Tribunal, normally in exchange for a one-off cash payment and/or other concessions from the employer.
A settlement agreement can provide a fast, cost-effective option for resolving existing employment disputes or avoiding potential future disputes. They are commonly used during redundancy proceedings and other kinds of terminations. They can be highly effective for a wide range of disputes as long as both parties involved have the right legal advice and support.
A key benefit of a settlement agreement is that it allows both parties to avoid the need for an Employment Tribunal, meaning the matter is kept private and any uncertainty over the outcome is side-stepped. Voluntarily agreeing a settlement is also usually faster, cheaper, and less stressful for everyone involved.
The specific contents of a settlement agreement will depend on the situation and the requirements of both the employer and the employee. Typically, it will include details such as:
- Compensation for termination of employment
- The employee’s agreement not to refer specific issues to an employment tribunal (i.e. a ‘waiver of claims’)
- The employee’s warranty that they have no other potential claims against the employer than those listed in the agreement
- A contribution towards the employee’s legal costs
- Reiteration of, or amendments to, any pre-existing restrictive covenants the employee entered with the employer during their employment
- An agreement by the employee to return any property in their possession belonging to the employer
- Indemnity from employee tax and National Insurance contributions in relation to the agreed financial settlement
- The employee agreeing not to use or share any confidential information relating to the employer or to offer any public criticism of the employer
For a settlement agreement to be considered legally binding it must:
- Be in writing
- Relate to a specific complaint or complaints
- Only be signed by the employee once they have had access to independent advice from a lawyer or certified, authorised trade union (this adviser must have appropriate insurance or professional indemnity cover)
- Name the employee’s adviser
- Allow the employee reasonable time to consider the agreement before they sign (the Acas Code of Practice recommends a minimum of 10 days)
- State the relevant statutory conditions regulating the agreement
To find out how Franklins Solicitors can support you with an employment dispute, please contact Sara Marshall, Head of Employment Law on 01908 660966 or email sara.marshall@franklins-sols.co.uk
