Settlement Agreements

When an issue arises during an employment relationship, one solution is to enter into a settlement agreement which terminates the employment mutually, confidentially and legally. A settlement agreement typically provides for the employee to receive a lump sum payment in return for them waiving their right to bring claims against the employer.

In order for a settlement agreement to be legally binding the employee must seek independent legal advice from a qualified employment solicitor. This will of course come at a cost to the employee and therefore the employer will usually offer to make a contribution to those legal fees as part of the agreement.

Any contribution made by the employer is a contribution only. Sometimes the employer’s contribution will not cover all of the legal fees incurred by the employee in the course of seeking advice on the settlement agreement. Legal fees will normally exceed the contribution offered by the employer in cases where negotiation has been undertaken to improve the terms of the settlement agreement and/or agree increased compensation payments.

Seeking sound legal advice in relation to a settlement agreement can provide many benefits including:

• Receiving an adequate settlement payment early on in the dispute, saving time and the additional legal fees that would be incurred as a result of litigation;
• Receiving a settlement payment without having to prove any liability on the employer’s part, therefore eliminating the risk of losing if the matter were to be progressed in the employment tribunal;
• Obtaining clarity about how to avoid breaching the terms offered as part of the agreement thereby reducing the risk of having to repay the settlement payment to the employer;
• Avoiding a dismissal situation which could save embarrassment when consulting with future employers;

Our employment specialists can provide advice in connection with settlement agreements.