It is not unusual for employees and employers to reach a stage where they both feel it would be beneficial to terminate the employment relationship. This may be because of cutbacks in the business or because of an unsettled dispute. Settlements agreements allow for a resolution of these circumstances on terms that can be beneficial to both parties. As part of all settlement agreements, an employee must seek legal advice.
Contact our Employment Law Solicitors on 0131 322 1449 or complete our online enquiry form
Employment Settlement Agreement Advice for Employees - Quick Guide
Settlement Agreements – What are they?
A Settlement Agreement (formally known as a compromise agreement) is a legally binding document (a contract) that terminates the employer-employee relationship, or brings an employment dispute to an amicable end. Generally it is an employer who will propose a Settlement Agreement, however it is open to an employee both to suggest and to negotiate the terms of the agreement.
The terms of a Settlement Agreement will be specific to the dispute and the relationship, however under a Settlement Agreement and employee will normally waive any future right to bring a claim before an Employment Tribunal in return for an agreed sum. Other common terms include an agreed termination date, or or a positive reference for the employee.
How do I enter into a Settlement Agreement?
A Settlement Agreement is a legal document and as a result, it carries with it certain legal consequences. In order for a Settlement Agreement to be binding on the parties, an employee must receive independent legal advice on the proposed terms of the Agreement. The advice must come from an independent legal advisor, who also holds professional indemnity insurance.
At Employment Law Edinburgh, we offer comprehensive advice to employees on the terms of Settlement Agreements on a regular basis, and are very accustomed to negotiating the financial compensation offered by employers. Furthermore, The legal requirement for an employee to obtain legal advice often results in the employer paying the fees of the employee's legal advisers. We carry professional indemnity insurance and offer pragmatic, tailored advice to employees which is not affected by an employer's paying for the fee of our services.
Do I have to accept the terms of a Settlement Agreement?
Employees are not obliged to accept the terms of a Settlement Agreement as offered by their employer. Where an employee believes that the proposed Settlement Agreement is unsatisfactory, the legal advisors of the employee will negotiate with the employer, for terms that are agreeable.
What happens if I accept the terms of a Settlement Agreement?
Where an employee accepts the terms of a Settlement Agreement, after receiving independent legal advice, it will be signed and returned to the employer. The end of the employer-employee relationship, often identified as the 'Termination date' will be set out within the Settlement Agreement along with a timetable for the employee to expect payment of their financial compensation. Generally, a reference will be provided by the employer, to allow the employee to find employment elsewhere.
Following the signing of the Settlement Agreement, the relationship will be brought to an end, the employee will be issued with the necessary compensation and will no longer hold any right to bring a claim before an Employment Tribunal.
Settlement of Employment Law Claims
Normally, the primary purpose of a settlement agreement is to settle any claim you may have against your employer. This waiver means that you can take no further action in relation employment tribunal claim as to the issues set out in the settlement agreement, as they are deemed to be settled in law. There are exceptions to this including:
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Your right to enforce the terms of the settlement agreement
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Anything related to pensions
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Any personal injury claim that you are not yet aware of, or that have not yet been raised
What are the legal requirements of a Settlement Agreement in the UK?
A settlement agreement, a legally binding contract between an employer and employee in the UK, must adhere to specific legal prerequisites to ensure its validity:
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Written Form: The agreement must be documented in writing, outlining its terms and the claims it covers. This guarantees clarity and minimises ambiguity.
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Independent Legal Advice: The employee must receive independent legal counsel before signing the agreement. This advice can come from a qualified lawyer or a certified trade union representative. The employer often covers the legal fees.
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Legal Advisor's Confirmation: The settlement agreement must contain a confirmation from the legal advisor, verifying that they've provided advice to the employee. This affirms the employee's comprehension of the agreement's implications.
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Voluntary Consent: The agreement must be entered into willingly, without any undue pressure from the employer. Coercion or duress could invalidate the agreement.
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Consideration: Some form of consideration (usually financial compensation) must be provided to the employee in exchange for agreeing to the terms. This exchange supports the binding nature of the agreement.
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Specific Claims: The agreement must specify the particular claims or potential claims it covers, preventing ambiguity and misunderstandings.
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Clarity of Language: The terms in the settlement agreement should be written clearly and understandably. Using complex legal jargon should be avoided to ensure full comprehension.
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Adequate Time for Consideration: The employee should be given reasonable time (typically at least 10 calendar days) to review and consider the terms of the agreement before signing.
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Revocation Period: After signing, the employee has a "cooling-off" period of 7 days to reconsider and withdraw from the agreement.
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Confidentiality Clause: Settlement agreements often incorporate confidentiality clauses, restricting the employee from discussing the terms, except with close family, legal advisors, or relevant authorities.
Adhering to these legal requirements ensures the integrity and enforceability of a settlement agreement. For both employers and employees, seeking legal advice is recommended to ensure their rights and interests are safeguarded throughout the legal proceedings. Keep in mind that legal regulations can change, so consulting with a legal professional well-versed in current UK employment law is essential.
Get Settlement Agreement Legal Advice Today
If you are considering the use of a Settlement Agreement in a dispute with your employer, or have already received one and have concerns about its terms, contact us today to speak to a specialist settlement agreement solicitor. Our advice is tailored to your situation, and will often be the responsibility of your employer to pay for.
Contact our Employment Law Solicitors on 0131 322 1449 or complete our online enquiry form.
