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A Settlement Agreement is a legally binding contract between an Employer and Employee which terminates the Employee’s employment and which settles any contractual and statutory Claims the Employee may have against their Employer. Generally speaking, the Employer will offer the Employee some form of ex-gratia (compensation) payment as compensation for loss of employment.
Settlement Agreements can be a useful tool in resolving workplace disputes and for bringing the employee’s employment to an end in a mutually agreed way. They are often offered during a redundancy situation but are also commonly used where there is a disagreement regarding the employee’s conduct or capability. The advantage of a Settlement Agreement to the Employee is that they generally will receive a payment of compensation in return for settling any potential Claims they may have against their Employer in respect of their employment or its termination.
In short, yes Settlement Agreements can be negotiated between the parties.
An Employee is able to negotiate the terms of a Settlement Agreement should they believe that the terms of the Agreement do not fairly reflect their position. An Employee is able to negotiate directly with their Employer or they can seek the advice of a Solicitor who will negotiate with the Employer on the Employees behalf.
When negotiating a Settlement, and provided such negotiations are a genuine attempt to settle, all correspondence and discussions should be titled to be “without prejudice”. This means that the parties cannot refer to the information or content of correspondence and discussions as evidence against the other party should negotiations break down and Court or Tribunal proceedings are commenced.
The Employee should consider that an Employer can withdraw their offer of a Settlement Agreement at any time prior to it being signed by both parties and, therefore, any prolonged negotiation period may cause the Employer to reconsider the offer of the same.
The Agreement will set out when the Employee’s employment will terminate and the Employer will generally pay an ex-gratia termination payment in return for the Employee’s agreement not to pursue any Claim against them in a Court or Tribunal.
The termination payment should offer the Employee reasonable compensation for relinquishing their right to bring a potential Claim against their Employer for loss of employment. Generally, the Claims that an Employee waives their right to bring against their Employer by signing the agreement include Claims for unfair dismissal, wrongful dismissal and breach of contract along with a number of other Claims which will be listed within the Agreement. Employees should be aware that Settlement Agreements are generally fairly stringent with regard to the Claims waived as they are formed to protect the Employer, having paid compensation to the Employee.
In addition to the termination payment, Employees are entitled to receive other contractual payments such as payment in lieu of notice (where the employment contract provides for this and where the Employee has not been given the opportunity to work their notice), any accrued but untaken holiday and, on some occasions, payment for loss of benefits.
There are also generally a number of other Clauses included within the Settlement Agreement, including various warranties and indemnities, confidentiality provisions to ensure that both the terms and discussions leading to the Settlement Agreement and business information are kept confidential, post-termination restrictions and agreed form of reference for the Employer to provide to a prospective employer.
In order for the Agreement to become legally binding the Employee must seek the advice of an Independent Legal Adviser, who, once the Agreement has been reviewed and the advice given to the Employee, will sign the Agreement to confirm that advice has been given. In consideration for the advice, the Employer will make a contribution towards the Employees legal fees.
If you have been provided with a Settlement Agreement and would like assistance in respect of negotiating the terms or if you require the assistance of an Independent Legal Adviser in respect of executing a Settlement Agreement, please do not hesitate to get in touch with our Dispute Resolution team who deal with Employment matters on 01243 787899 (Chichester), 01329 282841 (Fareham), 02392 492300 (Havant) or 01798 342391 (Petworth).
If you require further legal advice, please contact one of our experienced solicitors by emailing firstname.lastname@example.org who would be happy to assist.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice, and should not be relied upon as advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. All content was correct at the time of publishing. Legal advice should always be sought in relation to specific circumstances.