What are settlement agreements? A quick guide
An employee has the right to bring certain claims against their employer, whether such claims can be brought under statute (for example, unfair dismissal or discrimination claims), contract (for example, a failure to pay a bonus), or tort (for example, negligence claims). Such claims may arise on the employee’s recruitment, during the course of their employment, or upon termination. In certain circumstances an employer may wish to agree to provide the employee with benefits (e.g. a payment of compensation, a reference, sometimes an apology) in return for the employee’s agreement that they will waive their right to bring such claims, or withdraw them if they have already issued a claim. This may happen where employment is continuing, but it is most common for the parties to do so where employment has terminated (or is about to do so).
Employees can only agree to settle or waive most statutory claims by one of the following means:
- If an agreement is reached through ACAS (and recorded in a COT3 agreement); or
- If such agreement is recorded in a settlement agreement that complies with various statutory requirements (for example, the agreement must be in writing and the employee must receive independent legal advice on the terms and effect of the agreement)
Only certain statutory claims may be settled by a settlement agreement including, among others:
- Claims for unfair dismissal;
- Claims for a statutory redundancy payment;
- Claims for discrimination, harassment, victimisation or detriment;
- Claims for detriment or dismissal because the employee has ‘blown the whistle’;
- Claims in relation to the national minimum wage;
- Claims in relation to unlawful deduction of wages
Until July 2013 statutory agreements of this nature were renamed from “compromise agreements” to “settlement agreements”, although it is not clear why this change was made.
What should you do if you have been offered a settlement agreement?
If you’ve been offered a settlement agreement by your employer then one of the first things that you should normally do is fine a suitable specialist employment solicitor to advise you on your agreement: your employer will normally cover an agreed level of legal fees for the advice and you must receive legal advice from an independent legal adviser on the terms and effect of the agreement for the settlement agreement to be binding. However, it is up to you to choose how much or how little work you want your solicitor to do: most employees will, in my experience, want their solicitor to handle the negotiations on the agreement as well as the advice, but in some circumstances the employee may be best-placed to negotiate the terms of the agreement themselves (for example if they have a good existing relationship with senior management handling the negotiations or if they wish to keep the costs of the negotiation as low as possible).
Why should you choose Redmans to advise you on your settlement agreement?
Redmans have advised thousands of clients on their settlement agreements, and our specialist employment solicitors have dealt with agreements worth £1,000 to settlement agreements worth over £1 million.
If you want to discuss your settlement agreement further please contact our enquiries team by telephone on 020 3397 3601 or email Redmans using the following email address: firstname.lastname@example.org.