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Settlement agreement sets out the terms and conditions between an employer and employee when they agree to terminate the employment relationship or settle a potential employment tribunal or other employment related court claim.

Whether you are an employer or an employee considering a settlement agreement, we are able to assist. Here are the top 5 things you need to be aware of:

  1. The agreement must be in writing


  2. An employee must receive independent advice for the agreement to be valid

    To safeguard employees there is a requirement that they seek legal advice from a relevant independent adviser before signing the agreement.  This provision ensures that employees fully understand the implications of the terms, for example that they are waiving their right to pursue legal proceedings against their employer. It is usual for the employer to offer a contribution towards the employees’ legal costs for obtaining this advice.


  3. It may be possible to negotiate the terms

    An employee is not obliged to enter into a settlement agreement and further they do not have to accept the terms initially proposed by an employer. Settlement Agreements are usually marked “Without Prejudice”, which effectively means it is off the record, allowing the parties to negotiate the terms freely in a genuine attempt to settle any dispute. Where an agreement is not reached, the negotiations cannot be used in evidence against either party. 


  4. More than just a financial agreement

    In addition to the amount of money offered, employees may also wish to negotiate on other issues that assist them moving forward such as a reference, the provision of outplacement services and scope of post termination restrictions that may apply after their employment ends such as preventing them from working for a competitor.


  5. Settlement agreements are enforceable

    If either party breaches a valid settlement agreement, the terms can be enforced in the civil courts or the employment tribunal depending on whether the agreement was entered into before or after the employment ended.

If you require legal advice about a settlement agreement please contact us on 0113 3229222.