Employment Law & HR FAQs

A specialist solicitor will need to be instructed to advise on any settlement agreements. The solicitor will review the agreement and advise the employee as to its terms and effect. When the advice is given, the solicitor will need to sign off on the agreement before it can be entered into by the employee.

It is usually an employer that drafts the settlement agreement before it is given to the employee. When the employee seeks legal advice on the agreement, there may be negotiations on the terms of the agreement before it is finalised.

It is important for employers to seek legal advice when drafting settlement agreements, this is to ensure that the agreement is valid agreement and adequately covers the intended remit.

If you have been offered a settlement agreement, your employer is offering you the option to terminate your employment and essentially leave on a 'clean break'. It is necessary that employees seek legal advice when they have been offered a settlement agreement to ensure that the employee understands and is comfortable with it. When the agreement is finalised, an employee will be signing away most legal rights to bring any claims against their employer, so seeking legal advice is a must. A settlement agreement won't be binding unless it has been signed by an appropriate legal adviser.

No, it is your choice. A settlement agreement should be offered on a "without prejudice" basis, so if it is not accepted, both the employer and employee should not be prejudiced and should be able to continue as if the agreement was never offered.

No, a settlement agreement can be offered at any stage during employment. Redundancy is potentially fair reason for termination of employment, which can be effected without a settlement agreement (unless it is for an enhanced voluntary redundancy package), whereas a settlement agreement is a legally binding agreement to terminate employment that is entered into by both parties. Employment may continue after a settlement agreement, whereas it cannot continue after a confirmed redundancy.

It is likely that the settlement agreement contains specific terms regarding the consequences of a breach. It is a contract, so a breach of contract claim can be brought. Usually this is to repay the sums under it and cover any associated legal costs etc. The amount is often repayable as a debt, so interest would accrue. It is important to review the agreement to identify the consequences prior to signing it and prior to any action that could constitute a breach.

The terms of a settlement agreement are confidential and cannot be discussed with anyone except the legal advisor that you are seeking advice from and any other individuals (if any) explicitly listed within the agreement.

Whether a reference is given or not, is a term that will usually be contained in the agreement itself. In most cases, the format and content of the reference will be contained within the agreement. It is important not to rely on anything that is not expressly covered in the agreement, as once accepted, these will be the final terms you have come to with your employer.

A non-disclosure term is usually included within a settlement agreement. The term prevents the parties from discussing the agreement and the circumstances surrounding the termination of employment with anyone, with the exception of seeking legal advice on the agreement. If not included within a settlement agreement, a non-disclosure agreement would need to be enacted as a separate contract and would be used in different situations.

There is no rule on when a settlement agreement should be offered. It is usually a tool available to employers if they want to terminate an employee's employment without delay and to achieve a clean break.

"Without prejudice and subject to contract" usually means that a party does not wish to enter into a binding relationship until the terms of the agreement are agreed, at which point they become "subject to contract". Prior to that the employer and employee should not be prejudiced by the discussions, which fall under the without prejudice category.

The advantages of a settlement agreement are that they provide a clean break for both the employer and employee. In difficult situations, it can often be a time and cost saving measure to avoid legal costs pursuing an employment tribunal claim. While it can be cost saving in some cases, in others it may be more expensive, especially when paying out lump sum figures. If the agreement is not agreed then this may cause a breakdown in working relationships. Entering into a settlement agreement can protect the employee from going through a process that could detriment future employment prospects, such as summary dismissal or other reasons for termination.

A settlement agreement contains terms that effect the termination of employment of an employee, including for e.g. confidentiality, returning property and an employment law claim waiver. An employer will generally offer a lump sum payment, which typically comprises of the notice payment/accrued holiday and payments due under the employment contract. In addition, the employer will normally pay a compensatory amount for the loss of employment and consideration for the employee's waiver of claims. An employer will usually pay a contribution towards the employee's legal fees in taking advice on the terms of the agreement.

Settlement agreements can generally settle any claims, with certain limited exceptions, such as personal injury claims that were not known to the employee at the time of entering into the agreement, accrued pension rights, or rights to enforce the agreement. In some situations this may also include the right to be informed and consulted under TUPE.

Yes, employees can request a settlement agreement, however employers are not obliged to agree to any such request.

Signing a settlement agreement means that an employee will be giving up their legal rights to pursue a claim against their current or former employer for issues arising out of their employment. Settlement agreements can have consequences if they are breached. It is therefore a fundamental element of any settlement agreement that a legal professional advises and signs off on it before it is finalised.

The solicitor's fees for advising an employee on a settlement agreement will range depending on the professional/firm they choose to instruct. Employers who wish to successfully conclude a settlement agreement should be mindful that if they are not willing to provide a reasonable contribution, then this may put the employee off considering the settlement agreement much further.