What is a settlement agreement?
A settlement agreement is a legal contract entered into between an employer and an employee, designed to end a workplace dispute.
When entering into a settlement agreement, as an employee you normally agree:
- When your employment ends
- A sum of money to accept
- Not to sue your employer for any reason
Using a settlement agreement can avoid any lengthy internal procedures and a costly employment tribunal claim.
When is a settlement agreement used?
Whenever an employment relationship stops working a settlement agreement may be used. It is most common in the following situations:
- Disciplinary issues
- Job performance issues
- Ill health
- Employee grievances (e.g. bullying, discrimination and sexual harassment)
- A clash of personalities
Why would employers want to use a settlement agreement?
Many employers feel the law is on the side of the employee.
Opting for a settlement agreement is often a commercial decision to end a dispute quickly and sensibly. It is not an admission of fault or liability.
If after a lengthy internal process you are still taken to an employment tribunal, as an employer you may feel you have little to gain, regardless of whether you win or lose the case. Unrecoverable legal costs and valuable management time will be gone forever. Settlement agreements are not always appropriate but sometimes they are the most commercially sensible option to end a dispute quickly.
Why would employees want to use a settlement agreement?
Many employees feel the law is on the side of the employer.
Problems at work can be incredibly stressful. Rather than spend month after month pursuing internal procedures, ACAS early conciliation and an employment tribunal claim, most employees would prefer to draw a line under a dispute and move on. To do this, people require financial compensation to reflect what has happened and to give them time to find a new job.
When the aim of the employment tribunal is financial compensation, it would make sense to entertain the option of a settlement agreement, as it is a discussion about financial compensation that avoids the further stress of an employment tribunal.
How can Jordans Solicitors help?
In order to enter into a valid settlement agreement, an employee must take independent legal advice. This is where we can help. Our employment solicitors are settlement agreement experts.
We will review your case and the financial compensation on offer. Generally we find that employees take the following approach:
- A settlement agreement has been offered and the compensation on offer is reasonable. Our role here is to ensure the employee fully understands what they are signing so that there is no misunderstanding. The employee has nothing to pay as the employer would cover our reasonable legal costs.
- A settlement agreement has been offered but the compensation on offer is unreasonably low and/or there may be a problem with some other terms (eg. job reference, post-termination restrictions). Our role here is to re-negotiate the settlement agreement. Our funding arrangements (which include no-win no-fee) mean there are no surprise costs.
- A settlement agreement has yet to be discussed but it would be a sensible option for both sides to explore. Our role here is to attempt to secure a reasonable settlement agreement to allow both sides to move on quickly. Our funding arrangements (which include no-win no-fee) mean there are no surprise costs.
What should I do now?
If you have any questions about settlement agreements or for a free confidential discussion speak to one of our specialist employment solicitors today.
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