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A settlement agreement was previously known as a compromise agreement but in essence they do the same thing.
When you have a dispute with an employee it may be difficult to reach a settlement as the law sees them as vulnerable.
One way around this for the employee sign a special binding document known as a settlement agreement. The law has rules about what must be in this sort of agreement. The law also says that employees must also get independent legal advice. This is to ensure that they know what rights they are giving up. You also have to refer to that advice in the agreement.
In a settlement agreement the employee usally signs away all claims against their employer relating to their employment or dismissal. However the Employment Tribunal says that the agreement must identify genuine potential claims that are relevant to the particular circumstances.
Extra terms can be agreed
As well as settling the current dispute a settlement agreement can cover other issues. For example you can add terms about references. Sometimes they include agreements about confidentiality or promises not to make adverse comments about the business. You may also agree to include restrictive covenants. This can limit what work the employee does for a specific period. An Employment Tribunal can’t impose all of these terms whether or not an employee wins their claim. Therefore there can be advantages for both and employer and an employ in agreeing a settlement.
An employer will normally want a settlement agreement before it pays the employee any money. Therefore the employer will normally pay all or part of the employee’s legal costs for getting advice about the settlement agreement. This is on top of any settlement payment.
Once an employee signs a settlement agreement they won’t normally be able to make any claim against their employer relating to their employment or its termination.
I can advise and help you reach a fair agreement and a binding settlement.
Kirsten Moon – Employment Law Solicitor – Partner