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Settlement Agreements

Many employers, when terminating an employee’s employment contract, will offer the employee a sum of money in return for them entering into a settlement agreement terminating their employment. It may also prevent them from bringing employment-related claims against the employer. 

If your employer offers you a settlement agreement, what do you need to know?

What is a settlement agreement?

A settlement agreement, previously known as a compromise agreement, is a legally binding agreement that allows an employer to make a payment to an employee if they agree to waive their right to make an employment claim in relation to claims covered by the agreement. Employers often offer this type of agreement to an employee in order to end the employment relationship.

For a settlement agreement to be binding it must be in writing. It must also reference the claims that the employee is waiving and the employee must receive advice from a relevant independent adviser, often a solicitor, who will provide a certificate of advice.

Independent legal advice

As the agreement requires the employee to seek independent legal advice, it is usual for the employer to include a clause offering to pay an amount towards the legal fees of the independent adviser of the employee’s choosing.

Our employment team can help you to understand the terms of the agreement and can negotiate better terms with your employer. They can also assess why you are being given the settlement agreement and help you weigh up your options if you have a potential claim against your employer.

There is no requirement for you to sign the agreement if you are not happy with the terms. If you choose not to, you will retain your full employment rights to claim against the employer. However it is worth assessing the time and expense involved in issuing and pursuing a claim against the offer that the employer is making.

Our team will be happy to meet you at any of our offices across the Aire Valley. We are always on hand to give advice and assistance.