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If you are presented with a settlement agreement by your employer, you are under no obligation to accept it. Also, they cannot pressure you into accepting it when it is first given to you. When faced with a settlement agreement, you first need to assess if the agreement is fair and you will also be required, by law, to seek legal advice. If you do not receive qualified legal advice, then the agreement won’t be legally binding. Generally, legal advice is paid for by the employer; however, if you wish to negotiate your agreement, you may have to meet this cost yourself.
If you need legal advice to help you assess a settlement agreement or wish to further negotiate the terms and conditions, then contact our expert employment solicitors today on 0161 696 6170.
Before we go into how to assess a settlement agreement, let’s begin with what a settlement agreement is. A settlement agreement, which used to be called a compromise agreement, is a legally binding document between an employer and employee. Once a settlement agreement has been signed and has met all the legal criteria, an employee will no longer be able to make any type of claim, listed in the agreement, against the employer.
A settlement agreement may be given to an employee for a variety of reasons; some of which include:
What would constitute a fair settlement will depend on the reasons behind the why your employer has presented you with a settlement agreement.
For a settlement agreement to be legally binding, it must meet the following criteria:
If the settlement agreement does not meet one or more of the above, then it will not be legally binding. It is in the interest of both the employer and employee to ensure the settlement agreement is dealt with in the correct manner.
An employee can request a settlement agreement; however, an employer has no obligation to give their employee a settlement agreement if one is requested. Typically, they are normally offered by the employer to the employee to end an employment relationship, to resolve disputes or change the terms and conditions of employment.
You have the right to negotiate a settlement agreement and the things you should consider negotiating include:
Financial compensation - the financial compensation being offered should reflect the seriousness of the issues that have led to the settlement agreement. Also, if there are restrictive covenants that that mean you can’t seek or start a new job straight away, or could cause problems in finding a new job, then you should be compensated adequately for this. Your financial compensation may also include any holiday payment, payment in lieu of notice, bonus payments, share schemes and compensation for any other benefits lost.
Non-financial compensation - a settlement agreement can include non-financial compensation, such as a reference, garden leave and keeping company property, such as a car or a phone.
Confidential clauses - many settlement agreements include confidentiality clauses. This generally means that your employer cannot disparage you and you cannot disparage your employer; some confidentiality clauses may restrict you from revealing the contents of your settlement agreement. If you or the employer ignore the confidentiality clause, this is considered a breach of the settlement agreement and this may mean the ‘injured party’ may be able bring a breach of contact claim. When assessing your settlement agreement’s confidentiality clause, ensure you are not restricted to an unreasonable extent. There should be a list of exceptions with whom you can discuss your settlement with; for example, your partner/spouse or professional advisors. It is also important that you do not agree to waive your rights to make what is known as a “protected disclosure” (e.g. reporting illegal activity) as this could breach whistle-blowing legislation.
Restrictive covenants - depending on your role and seniority, your settlement agreement may include restrictive covenants. Generally, this means you will not be able to compete commercially with your former employer for a certain period of time after your employment ends. It is worth noting that restrictive covenants are not always enforceable, as they can act as a restraint of trade, which means they are against public policy. Our expert employment solicitors can help you determine whether or not a restrictive covenant is fair, and whether you are receiving sufficient compensation for it.
Our settlement agreement solicitors can help you negotiate the best possible agreement for your situation. Contact us today on 0161 696 6170.
Martha McKinley explains what a settlement agreement is, the importance of expert legal advice - whether an employee who has been offered a settlement agreement or from the perspective of an employer.
Martha also provides guidance on the sort of thing a settlement agreement will include along with information on the cost of legal advice and the timescales involved.
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What do I need to consider when offering an employee a settlement agreement?
Settlement agreements can bring an end to any claims from an employee such as, claims for unfair dismissal or discrimination arising out of the employee’s employment or termination. If executed properly settlement agreements...
Settlement agreements, which used to be known as compromise agreements, are legally binding documents which can be used by both the employee and employer to resolve a dispute or end employment. Settlement agreements are covered in the Employment Rights...
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