Settlement Agreement Solicitors

An employment settlement agreement is a legally binding contract between an employer and an employee.

It usually brings the employee’s employment to an end (or settles an ongoing workplace dispute) on agreed terms. In a settlement agreement, the employee typically receives a financial sum (and/or other benefits) and, in return, agrees not to bring any legal claims (such as unfair dismissal or discrimination) against the employer.

Employers often use these agreements to resolve issues quickly and confidentially without resorting to formal procedures or an employment tribunal. Once signed by both parties, and after the employee has taken independent legal advice, the agreement becomes binding on both employer and employee. Settlement agreements also often include additional terms like confidentiality clauses and agreed references as part of the deal. 

A “compromise agreement” is simply an older term for a settlement agreement.

Compromise agreements are legally enforceable contracts between a company and an employee. The employee consents to waive potential claims, while the employer typically provides financial compensation (and sometimes other benefits).

Occasionally, additional perks may be included for the employee’s benefit, for example, an agreed reference letter or outplacement support.

(Note: The term “compromise agreement” was replaced by “settlement agreement” in UK law in 2013, but both refer to the same thing.) 

Yes – because signing a settlement agreement means you waive important rights, you must obtain independent legal advice for the agreement to be legally valid.

In fact, one requirement for a settlement agreement to be binding is that the employee has advice from a qualified solicitor (or certified adviser).

A settlement agreement solicitor will explain what the terms mean, ensure you understand the consequences of signing, and confirm that you are not giving up any rights without appropriate compensation.

Your employer will usually contribute to the cost of this legal advice, so there’s no reason not to get a solicitor to review your settlement agreement before you sign. 

There are often pros and cons to accepting a settlement agreement, and these very much depend on your individual situation.

You should not feel pressured to sign a settlement agreement quickly: it is often better to go and take time to consider the offer and take legal advice.

You are under no obligation to answer immediately, and while the employer may be able to withdraw the offer, they most likely will be as eager for a resolution as you are.

Keep in mind that the ACAS Code of Practice on Settlement Agreements recommends that employers provide at least ten days for employees to consider their offer, and this is the minimum timescale in the context of a 'protected conversation'.

Getting legal advice can help you understand whether you wish to accept or reject the offer and whether there is any scope to improve the offer or its terms so that they better suit you.

We can provide you with an expert opinion on:

• Whether the settlement agreement is fair;
• What a reasonable settlement agreement is, in the context of your circumstances;
• Whether there are any other options available to you;
• The strength of your case, whether you would likely win if you didn't sign the settlement agreement and pursued a claim in the Employment Tribunal instead; and
• The potential value of that claim.

If your employer offers you a settlement, don't be afraid to make a counteroffer.

Employers often leave room within their budget to increase the offer if necessary. This, of course, means that, yes, there may be scope to negotiate a settlement agreement.

The key to a good negotiation, however, is not to try and 'beat' the other party, which will only create ill will and make the negotiation considerably more difficult. Instead, you should seek to reach an outcome that everyone is happy with. It will also make it that much easier and faster to come to an agreement.

Consider what is reasonable: What are you giving up? Do you have a strong claim? How long may it take you to find a new job on a comparable salary? How much can the organisation afford? Essentially, what is a reasonable settlement agreement in the circumstances of your case?

One very useful step is to have an idea, in your mind, of how much you would be willing to accept and how much you would ideally aim for. You will likely end up settling somewhere in between.

If you need settlement agreement advice, speak to a settlement agreement lawyer from Myerson Solicitors.

Because you need to go through the terms of the settlement agreement with an independent and qualified lawyer, there will be a cost associated with this.

The cost varies depending on the complexity of the agreement and whether you are looking for any assistance in negotiating the terms and the value of the offer.

In most circumstances, because the employer is aware that you are obliged to get independent legal advice, they will contribute towards some or all of your legal fees.

You should check the terms of the settlement agreement for details as to how much your employer is prepared to contribute towards your fees, if any.

For more information, please read our Guide to Settlement Agreements. 

A settlement agreement typically includes several key components, which may vary depending on the specific circumstances of the case. These components may include: 

• A Description of Claims or Disputes Being Settled: This section details the issues being resolved, such as unfair dismissal claims or breaches of the employment contract. 

• Compensation or other terms offered: The amount of financial compensation or other benefits the employee will receive. 

• Conditions or requirements for compensation: Any stipulations the employee must meet to receive the agreed compensation. 

• A Confidentiality Clause: Ensuring the employee does not share confidential information about the employer, its business and any customers or clients. 

• Non-Disclosure Clause:  Information regarding who the employee (and employer) are prevented from (or permitted to) disclosing the terms of the agreement to. 

• Employee’s Post-Employment Obligations: Outlines the responsibilities the employee must adhere to after leaving the employer, including any restrictive covenants (such as restricting the employee from soliciting business from the employer’s clients or customers). 

• Employer’s Post-Employment Obligations: Details the employer’s responsibilities after the employee’s departure. 

It’s essential to note that the specific terms and conditions of a settlement agreement can vary widely depending on the circumstances of the case. An experienced settlement agreement solicitor can help ensure that the agreement is fair and reasonable and that the employee’s rights are protected. 

In order for a settlement agreement to be legally binding, it must meet certain requirements. These requirements include: 

• Written agreement: The settlement agreement must be documented in writing. 

• Relating to a particular complaint or proceedings: The settlement agreement must be in relation to a particular complaint (such as a complaint about discrimination under the Equality Act 2010) or particular proceedings (such as a claim for unfair dismissal) 

• Independent legal advice: The employee must receive independent legal advice on the terms and conditions of the agreement and its effect on the employee’s ability to pursue any rights before an employment tribunal. The independent legal adviser must have a current contract of insurance or professional indemnity insurance, covering the risk of a claim against the employee in respect of the advice, and the agreement must identify the adviser.  

• Conditions regulating settlement agreements: The agreement must state that the conditions regulating settlement agreements under the relevant law have been satisfied.  

• It’s essential to note that if a settlement agreement does not meet these requirements, it may not be legally binding. An experienced settlement agreement solicitor can help ensure that the agreement meets all the necessary legal requirements.