Why have a settlement agreement?

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A settlement agreement makes sense for both employer and employee. It binds both in law after a job ends and it creates a ‘clean break’.

A settlement agreement is used to bind employer and employee to the terms it sets out, and to do so in a way that binds the parties (employer and employee) in a clean break. This means that, other than in exceptional circumstances, neither employee or employer can then challenge the settlement agreement – for example before an employment tribunal.

What if I refuse a Settlement Agreement?

If you refuse a settlement agreement your employer will not be bound to pay for you to receive independent legal advice. They may also be less inclined to offer you favourable terms around your departure.

Can I sign a Settlement Agreement without seeing a Solicitor?

Yes you can sign a settlement agreement without getting independent advice from an employment law solicitors but the settlement agreement will not then be legally binding. It is a requirement of the relevant law that the employee received independent advice from a solicitor of their own choosing, and their reasonable costs are paid by the employer, for the agreement to be binding.

Can I bring an Employment Tribunal Case after a Settlement Agreement?

Generally speaking a settlement agreement will give a clean break to both employer and employee and so will remove the right to future legal action. That is perhaps one of the very reasons why they are so helpful – to give that clean break and the peace of mind that goes with it.

Though settlement agreements purport to exclude all claims, there are a few exceptions – for example personal injury. So, if you are exposed to something which injures you during your employment (eg asbestos) this can not be excluded by a settlement agreement.

What will a Settlement Agreement cover?

A settlement agreement is of great benefit to your employer where there are question marks over their conduct as your employer. So, for example have there been issues around your working conditions, or do you feel aggrieved as to how you have been treated. Do you feel that you have been discriminated against? Or, perhaps you may even feel you have been a victim of bullying in the workplace? It may even be that your employer brought disciplinary action against you for performance issues that you do not agree with. Whatever the reason, a settlement agreement can cover these and other issues bringing to an end potential for future claims. Obviously therefore, if there is a question mark over your employers conduct, this will provide them with the comfort that you will not be able to bring a claim to the employment tribunal in the future.

A settlement agreement may be used to create a clean break with a difficult employee. It avoids future claims at the employment tribunal.

Will my employer offer me Compensation?

As above, your employer may feel inclined to offer compensation as a ‘commercial decision’ to avoid future disputes with you.

Will I get a Settlement Agreement if I simply resign?

If you have a grievance of any sort with your employer you must raise it with them, and do so whilst still in their employment. If you simply resign and so without raising your concerns you will be deemed to have ended your contract of employment yourself. And accordingly, there is no reason for a settlement agreement to be used.

Can a Settlement Agreement cover TUPE?

Used correctly, settlement agreements may well be utilised to create ‘clean breaks’ with employees leaving a business that is being sold.

> Read more about TUPE.

Who prepares a Settlement Agreement?

Your employer is responsible for preparing the settlement agreement.

Can my employer withdraw a Settlement Agreement?

Yes, your employer can withdraw a Settlement Agreement at any point up to it being signed by them.

Who signs a Settlement Agreement first?

Typically, the employee will receive independent legal advice on the terms of the settlement agreement. The employee and their solicitor will both sign the settlement agreement. It will then go to the employer who will sign. Then, and only then, is the settlement agreement legally binding.

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