Settlement Agreement

Why choose us?

  • Same or next day appointments are usually available
  • Costs are usually limited and covered by your employer
  • Quick turnaround in providing the signed agreement to your employer

Contact us now if you require advice on a settlement agreement

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What is a settlement agreement?

A settlement agreement is often referred to as a ‘severance’ or ‘redundancy agreement’ and is previously known a ‘compromise agreement’.

A settlement agreement is a formal and legally binding contract between an employee and employer. The settlement agreement prohibits employees from suing their employer, usually after they have received a sum of money in return for agreeing not to bring certain claims against their employer.

Once a settlement agreement has been signed by an employee they will no longer be able to make an employment tribunal claim or any other type of claim that has been listed in your agreement. It is important that your agreement does not include unfair terms, which is something we will be happy to advise you upon on sight of the settlement agreement.

For a settlement to be legally binding, an employee must receive independent legal advice. At Browell Smith and Co Solicitors we will be happy to provide you with the immediate advice you need, and guide you through the process.

The requirements of a legally binding settlement agreement:

  • A settlement agreement must be in writing
  • It must relate to “particular proceeding” for example complaints the employee may have
  • It must be signed by the employee
  • The employee must identify a relevant independent adviser from whom the employee has received advice as to the terms and effect of the proposed agreement and in particular its effect on the employee’s ability to pursue their rights before an employment tribunal.
  • The adviser must be covered by professional indemnity insurance.
  • The agreement must state that the legal conditions regulating settlement agreements are satisfied.

ACAS have issued a statutory Code of Practice on Settlement Agreements, which sets out how settlement agreements should operate and also provides best practice of how pre-termination negotiations should be undertaken.

The code is not binding, but employers would need to justify why they deemed it not necessary to adhere to it.

Legal advice

The employee must seek specialist independent legal advice before signing the settlement agreement. The employment solicitor should advise the employee on any potential claims so that the employee fully understands the legal issues and the value of any potential claims.

As employees have rights under UK law, anyone signing a settlement agreement should seek legal help before signing as a solicitor will make sure your rights are protected and that you are aware and fully appreciate these rights before you sign them away.

These rights fall under three main categories:

Contractual rights – These rights are set out in your contract of employment and will state your job title, your holiday entitlement, your right to be paid a salary, any other benefits as well as your notice period.

Statutory rights – These rights derive from UK statute and any claims regarding these rights can only be pursued in an Employment Tribunal. These rights protect you from a wide variety of things including:

  • Unfair dismissal
  • The right to a statutory redundancy payment
  • The right not to suffer unauthorised deductions from your wages
  • The right not to be discriminated against based on certain prohibited grounds such as marital status, gender, racial origin, sexual orientation, national origin, disability, religion, trade union membership and age.
  • The right to receive a minimum wage
  • The right to receive maternity and paternity rights

Common law rights – These rights are derived from the general law and regard how you are treated by your employer. These may involve aspects such as negligence, defamation and personal injury and any claims regarding these rights will have to go through the High Court or County Court.

This is by no means an exhaustive list. Without the appropriate legal advice, employees run the risk of signing away or waiving their rights by signing a document that they do not fully understand.

What are the benefits of settlement agreements?

The advantage to the employer of getting a settlement agreement is that the employer can be sure the employee will accept the settlement and not seek further compensation. The advantage of a settlement agreement to the employee is that they receive a guaranteed amount of compensation in return for settling their claims.

Our settlement agreement solicitors can assist by:

  • Advising you on whether any claims arise on the termination of employment
  • If so, advise you what those claims might be worth
  • In the light of that information, advise you whether the sum offered is reasonable in the circumstances
  • Explain the meaning and effect of the agreement to you and advise you whether anything needs to be amended or changed

What terms might a Settlement Agreement include?

The terms included in a Settlement Agreement will vary depending on the circumstances of the particular case. However, it is common for Settlement Agreements to contain clauses dealing with the following:

The terms included in a Settlement Agreement will vary depending on the circumstances of the particular case. However, it is common for Settlement Agreements to contain clauses dealing with the following:

  • The date employment terminated
  • List of claims settled
  • Settlement package including when payment will be made and by what method
  • Parties understanding of the tax position
  • Tax indemnity from the employee
  • Reminder of any restrictive covenants or confidentiality obligations in the contract
  • Confidentiality about the fact, content and circumstances of the agreement
  • Obligations on the employee or both parties not to make or publish any derogatory comments
  • An agreed reference
  • Repayment provisions for breach by the employee of the settlement agreement
  • Employer contribution to the cost of obtaining legal advice on the terms of the agreement
  • Arrangements on termination

Why do I need a solicitor?

Settlement agreements can be written in very formal language and can refer to sections of Acts and Regulations which you may never have heard of.  Therefore, it is important that you understand the effect of the settlement agreement. It is a legal requirement that you get professional advice on what the agreement means. It is also a legal requirement that your adviser signs the settlement agreement to confirm that advice has been given.

Will I need to pay for this?

The cost of advice under a settlement agreement will in the majority of cases be covered by your employer, meaning that you may not have to pay anything for this advice personally. We will confirm this to you on initial contact.

What should I do next?

If you have been offered a settlement agreement by your employer and would like to talk this through with our legal experts please contact us on 0191 691 3418 and we will be happy to discuss your options and guide you through the process.

Alternatively, you can complete our online enquiry form at any time and we will call you back.

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