What are Settlement Agreements?
A settlement agreement is a legal document an employer may offer to an employee to end their employment or resolve a dispute. It usually involves a compensation payment in exchange for the employee agreeing to waive certain legal claims against the employer.
Common Reasons for Settlement Agreements
- Enhanced redundancy: Offering more than statutory redundancy pay.
- Performance issues: Alternative to a performance improvement plan.
- Mutual agreement: Agreeing to part ways due to a disagreement or other reasons.
Why do Employers Offer Settlement Agreements?
Employers use settlement agreements to resolve disputes quickly, avoid litigation, or provide a smooth exit for the employee. In return for compensation, employees typically waive rights to pursue legal claims like unfair dismissal or discrimination.
Why Is Legal Advice Essential?
You must obtain independent legal advice before signing a settlement agreement. This is to ensure you understand the terms and the legal implications, including waiving your right to sue your employer. The legal adviser must sign an “Adviser’s Certificate” to make the agreement legally binding.
Who Pays for Legal Advice?
Employers typically contribute to the cost of legal advice. This should be stated in the settlement agreement. If unsure, you can ask your employer or clarify this with your legal adviser.
What Legal Advice Will I Receive?
- Your adviser will review the terms of the agreement, including:
- Compensation: Amount and timing of payments.
- Salary & Benefits: Notice pay, holiday entitlement, and other benefits.
- Other Entitlements: Shares, stock options, or private healthcare.
- Restrictions: Post-termination clauses like non-competes agreements.
- Confidentiality & References: Terms regarding confidentiality and agreed references.
- Legal Fee Contribution: Employer’s contribution to legal costs.
If you need advice on a settlement agreement, or if you’re an employer considering one, contact our employment law team for a consultation. We’ll guide you through the process and ensure you reach a fair resolution.
For further information on this topic or on any other legal area, please contact John Szepietowski or Kay Stewart at Audley Chaucer Solicitors on 01372 303444 or email admin@audleychaucer.com or visit our Linkedin page.
This information is correct as of December 2024
Gaina Kapoor
