With the changing face of UK employment law, and amid an uncertain economic climate, settlement agreements are becoming increasingly common in the workplace.
A settlement agreement (formerly called a “compromise agreement”) is a legally binding contract between an employer and an employee. Whilst settlement agreements can be used for a number of issues, most commonly they are used to bring employment to an end. The offer of a settlement agreement does not mean that you have done anything wrong, and accepting a settlement agreement is entirely voluntary.
You will usually be offered some form of compensatory payment but, typically, in return, would be asked to waive your right to pursue certain legal claims you might have against your employer in an Employment Tribunal or Court.
We understand that receiving a settlement agreement from your employer can leave you feeling stressed, alone and unsettled about what to do next, particularly if you are facing dismissal or redundancy, or if you are involved in some sort of dispute; but, settlement agreements do not have to be daunting and can offer you a clean and straightforward exit from an employment relationship, particularly considering how long employment disputes and issues can take to resolve.
So, what should you do if you do receive a settlement agreement?
1) Don’t panic
It’s a good idea to consider what your overall objective is before doing anything. If you think that ending your employment is an option for you, are you happy with the terms proposed by your employer?
Under ACAS guidelines, an employee should be given a minimum of 10 days to consider a proposed settlement agreement so you should have been given time to think about what you want, and to seek legal advice.
Don’t sign anything immediately.
As entering into a settlement agreement is voluntary, you do not have to sign though, if you do not sign, your employer may proceed with any action they were considering prior to the offer of a settlement agreement (e.g. redundancy).
2) Get legal advice
For a settlement agreement to be legally valid, you must receive relevant advice from a legal advisor, usually from a Solicitor. Without legal advice, the settlement agreement has no legal effect. Your Solicitor must sign a “certificate” to confirm they have provided you with the relevant advice.
For this reason, employers will usually offer a financial contribution to your legal costs within the settlement agreement.
Whilst legal advice is a legal requirement, it is also the most effective way for you to understand the implications of signing a settlement agreement and to identify any terms which may be unfair or unreasonable.
Your Solicitor will review your agreement, advise you on the terms, assess the compensation package on offer, and identify any issues with either the agreement or your negotiating position. Your Solicitor will also advise you if there are any potential claims you may be waiving your rights to make arising out of your employment or its termination.
3) Consider negotiation
There is no fixed formula for the amount of compensation you should receive however, you may be in a stronger position to request a more favourable package if it appears that you have a strong claim against your employer.
Knowing where you stand before you decide to negotiate is important and your Solicitor can provide you with information as to what you could potentially recover if you brought a successful claim before an employment tribunal.
Settlement agreements are generally negotiable. Common areas for negotiation include the financial payment(s), the provision of a reference or minimising restrictive covenants, though the exact nature of any negotiation depends on your individual circumstances.
At Carr & Co, our Solicitors can guide you through every stage of the settlement agreement process. We can help you understand your settlement agreement; assess the value of any claim you may have and assist you with negotiating with your employer.
Our fees will usually be covered by your employer’s contribution, particularly if you only require the legal advice necessary to ensure the agreement is valid. Additional fees may be required for negotiation which would be discussed with you at the outset.