Settlement agreements are legally binding contracts which can be used to end an employment relationship on agreed terms. Settlement agreements can also be used to resolve an ongoing workplace dispute.
Settlement agreements are normally proposed by the employer. In return for whatever termination arrangement is agreed, the employee agrees to waive their rights in making an legal claim against the employer about any issues listed in the agreement.
A legally binding agreement
For the settlement agreement to be valid, the following conditions must be met:
- The agreement must be in writing.
- The agreement must relate to a particular complaint or proceedings.
- The employee must have received advice from a relevant independent adviser, such as a lawyer or a certified and authorised member of a trade union.
- The independent adviser must have a current contract of insurance or professional indemnity.
- The agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.
Employees should be given a reasonable amount of time to consider the proposed conditions of the agreement; where no set period is agreed, the ACAS Code of Practice on settlement agreements specifies a minimum of 10 calendar days. To ensure the agreement is fair, employers will often contribute towards the costs of the employee’s independent legal fees.
Settlement agreements are voluntary, and parties do not have to agree to them.
Where the employer and employee are unable to reach an agreement, the settlement negotiations cannot usually be referred to as evidence in any subsequent unfair dismissal claim.
Employers must follow a fair process and use the ACAS Code of Practice on Discipline and Grievance procedures. Failure to do so may be grounds for a claim of unfair dismissal.
Independent legal advice to negotiate a fair agreement
Our employment law team has extensive experience of negotiating and advising on settlement agreements. We have advised both employees and employers so we have excellent insight of the entire process.
We will advise you on the agreement terms and the effect of the proposed agreement on your ability to pursue rights before an employment tribunal.
For an informal conversation about your needs telephone 01903 863284 or use the contact form to detail your requirements.