Employment Settlement Agreements
Settlement agreements are commonly used to bring an employment relationship or workplace dispute to an agreed conclusion. They can provide certainty for both employer and employee by recording the terms on which employment will end, or by resolving potential employment claims without the need for Employment Tribunal proceedings.
At Darren David & Co, clients receive clear and practical advice on the terms and effect of settlement agreements, including what rights are being waived, whether the proposed terms are reasonable, and what steps are required before the agreement becomes legally binding.
What Is a Settlement Agreement?
A settlement agreement is a legally binding agreement between an employer and an employee. It usually provides for the employee to receive a financial payment or other agreed benefits in return for agreeing not to bring certain claims against the employer.
Settlement agreements are often used in situations involving:
- Redundancy
- Workplace disputes
- Disciplinary or performance concerns
- Grievances
- Senior executive exits
- Mutual termination of employment
- Unfair dismissal or constructive dismissal concerns
- Discrimination or whistleblowing allegations
- Business restructuring
For a settlement agreement to be valid in relation to statutory employment claims, the employee must receive advice from an independent legal adviser.
Advice for Employees
Before signing a settlement agreement, it is important to understand exactly what the agreement means and what rights are being given up.
Darren David & Co can advise employees on:
- The terms and legal effect of the agreement
- The claims being waived
- Compensation and termination payments
- Notice pay, holiday pay, bonus and commission
- Tax treatment of payments
- Confidentiality clauses
- Agreed references
- Restrictive covenants
- Return of company property
- Post-employment obligations
- Whether any terms should be negotiated
The aim is to ensure that employees understand the agreement fully before signing and are able to make an informed decision.
Advice for Employers
Settlement agreements can help employers manage exits, reduce litigation risk and resolve workplace disputes efficiently.
Darren David & Co can assist employers with:
- Drafting settlement agreements
- Negotiating terms
- Managing employee exits
- Settlement strategy
- Confidentiality and non-disparagement clauses
- References and announcements
- Post-termination restrictions
- Redundancy-related settlements
- Resolving grievances or workplace disputes
- Reducing the risk of Employment Tribunal claims
A carefully drafted settlement agreement can help protect the business and provide a clear conclusion to the employment relationship.
Why Independent Legal Advice Is Required
An employee must receive independent legal advice before a settlement agreement can validly waive statutory employment claims. The adviser must explain the terms and effect of the agreement, including its impact on the employee’s ability to bring claims before an Employment Tribunal.
The agreement will usually identify the legal adviser and confirm that the statutory requirements have been met.
Costs and Employer Contributions
In many cases, the employer will contribute towards the employee’s legal costs for taking advice on the settlement agreement. The level of contribution can vary depending on the complexity of the agreement and whether negotiation is required.
Darren David & Co can review the agreement and confirm the likely cost before work begins.
Why Choose Darren David & Co
Darren David & Co combines traditional client service with a modern, practical approach to employment settlement agreements. The firm prides itself on being approachable, responsive and thorough, while providing clear advice in plain language.
Clients benefit from careful review, prompt communication and practical guidance designed to bring matters to a clear and effective conclusion.
Professionals who care
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Frequently Asked Questions
Settlement agreements can feel unfamiliar, particularly where employment is ending or a workplace dispute has arisen. These FAQs answer common questions before taking the next step.
Can the terms be negotiated?
Yes. Compensation, references, payment dates, confidentiality wording and other terms may be capable of negotiation.
Do I have to sign a settlement agreement?
No. A settlement agreement is voluntary and should only be signed once the terms are understood and accepted.
Who pays the legal fees?
Employers commonly make a contribution towards the employee’s legal fees, although the amount can vary.
How quickly can a settlement agreement be completed?
This depends on the complexity of the agreement and whether any changes need to be negotiated.