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Specialist Employment Law Solicitors in Abingdon
For Oxford, Oxfordshire, Berkshire, London & the Thames Valley

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What are settlement agreements all about?

What is a settlement agreement?

This is the name given to an agreement which settles employment law rights contained in UK laws, like unfair dismissal and sex discrimination. The Government thought that workers should have special protection before they signed away important employment law rights, and so it set out special requirements for the agreement. If these requirements are not met, the agreement will not settle these employment law rights and the worker will still be able to bring a claim about them in the employment tribunal. These requirements include that the worker must get independent legal advice on the terms of the agreement.

Settlement agreements used to be called compromise agreements and some people still use that older name for them.

Typically, a settlement agreement is used to document an agreement that the employee’s employment will end and they will get a termination of employment payment as compensation.

Why is the agreement so long?

To settle employment law claims, the agreement could actually be quite short. However, it has become usual for employers to include lots of other paragraphs in the agreement which they think will be good for their business. These often deal with things like confidentiality and not bad mouthing the employer.

Employers also try to tie the employee up in knots to stop him or her signing the agreement and then still trying to bring a claim against the organisation. Therefore, there are often penalties in the agreement which punish the employee if they do still try to bring a claim, for example, requiring the employee to meet the employer’s legal fees of defending any claim.

What employment law claims will the agreement settle?

The solicitor who advises you on the settlement agreement should explain this to you. It will depend what the employer has decided to put in the agreement. However, most settlement agreements try to settle all claims which an employee may have. The only exception to this may be claims relating to their pension entitlements and claims for personal injury where the worker has no current knowledge of a potential claim.

What other clauses will the employer include in the settlement agreement?

Your adviser should explain this to you, but here are some common ones:

  • You will keep the organisation’s information confidential.
  • You will return all the organisation’s property.
  • You will keep the fact you have been offered a settlement agreement confidential and all its terms.
  • You will not say or do anything which will bring the organisation or its staff into disrepute.
  • You agree that you have not been offered a new job yet.
  • You will give the organisation help with any internal committed investigations and court claims which it may need, after you have left.
  • You confirm that you have not committed a gross misconduct. (The employer will not want to pay its departing employee a termination payment if it could have dismissed the employee without payment for gross misconduct.)
  • You will abide by any terms in your contract of employment which stop you from competing with the business after you leave it.

  • Do I have to get legal advice on the agreement?

    Your employer will insist that you get legal advice on the agreement, because, if you don’t, the agreement will not settle any employment law claims which you may have, like unfair dismissal. So, your employer is not doing you a favour when it offers to pay for a solicitor to give the advice. It is just ensuring that the agreement will settle any claims you may have. As well as going to a law firm for the advice, you could also get it from a trade union.

    What will the legal advice cover?

    That’s up to you. The legal advice does not have to include whether the sum of money your employer is offering you is reasonable in the circumstances. It only has to cover the terms and effects of the settlement agreement, and, in particular, what effect it will have on your ability to bring a claim in the employment tribunal. Therefore, most employers don’t offer much towards the legal fees – they only want the employee to get minimal legal advice and don’t want to pay for the employee to get advice which could mean they challenge the amount of the termination payment.

    You can ask the solicitor to cover the level of advice you require, but you will have to find out from the solicitor what they will cover for the fee contribution being offered by your employer. Many solicitors in the Thames Valley are not able to provide even minimum advice for the low fees offered by many businesses. If you want full advice on whether the settlement is a “good deal” and the effect of the agreement, you may have to pay for some of the advice yourself. You are also likely to have to pay for some of the advice yourself if you want to negotiate with the business over the terms of the settlement agreement.

    There is a ‘reaffirmation certificate’ in my settlement agreement. What is that?

    Sometimes, settlement agreements provide that the employment will end some weeks or months after the employee signs the settlement agreement. The employer will want certainty that the employee will not bring a claim about something that couldhappen in that intervening period. Therefore, they require the employee to sign another mini settlement agreement, a reaffirmation certificate, when they leave the employment and before they get the termination payment.

    Reaffirmation certificates are fairly problematic for employees:

  • The employee must sign away their right to complain about something which could happen in the future.
  • They involve more work for their solicitor who must get involved again when the employment ends. This may mean higher legal fees. Employers usually forget this and do not offer any more contribution to legal fees.

  • Can employment law plus advise on my settlement agreement?

    Jill Kelly, at Employment Law Plus, has been advising on settlement agreements since they were first introduced in the 1990’s. She has a wealth of experience in providing this kind of advice and support. Please contact us to discuss what level of support you would like with your agreement.

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