Generally, the main purpose of a settlement agreement is to commit the employee to waive certain claims which may arise from their employment or the termination of their employment. Broadly, the claims that an employee may have as a result of their employment or the termination of their employment are as follows:
- Statutory claims: for example, claims for unfair dismissal, discrimination, harassment or victimisation (amongst others);
- Contractual claims: claims for breach of contract/wrongful dismissal;
- Tortious claims: for example, a claim for personal injury;
- Pension claims: a claim in respect of the employee’s accrued pension with their employer
Statutory claims are generally the most common form of claims that an employee may try and assert against their employer – the most common types of claims settled are generally claims for unfair dismissal, constructive dismissal, discrimination, and harassment.
Some statutory claims do not need a specific form of waiver (for example. a claim under the Protection from Harassment Act 1997), but employers normally prefer to obtain a specific form of waiver (via a settlement agreement) in order to obtain certainty that all types of claim are being settled.
A contractual claim is a claim for breach of a particular contract – this could, for example, be a breach of a contract of employment, a breach of a share scheme, or a breach of share option agreement.
An employee can enter into a valid settlement of any contractual claims (for example, a claim for wrongful dismissal) as long as the employee receives “valuable consideration” for the waiving of their particular contract claim.
Personal injury claims
The employer will commonly want the employee to settle any personal injury claims that they are aware of, but the employee will generally be able to bring claims for personal injury that they are not aware of (and could not reasonably be aware of) as of the date the settlement agreement is completed.
It is not possible for an employee to waive any accrued pension rights at their employer save in certain limited circumstances.