Settlement Agreement: What to do if you are offered one

May 20, 2020, By

Given the current uncertainties created by COVID-19 and the lockdown, employers may be faced with having to make the decision to make redundancies within their organisation. In some circumstances, employers may decide to deal with redundancies via a settlement agreement, rather than pursuing a formal consultation process.

Alternatively, employers may ask for volunteers before continuing with compulsory redundancies.

What is a Settlement Agreement?

Usually, if a settlement agreement is proposed, an employer will make an enhanced payment. It will reflect the employment rights that you are giving up by entering into it. This payment will be over and above what you would ordinarily receive if your employment is terminated.

ACAS sets out the following explanation of what they are:

  • Legally binding contracts that waive an individual’s rights to make a claim covered by the agreement to an employment tribunal or court
  • Must be in writing
  • Usually include some form of payment to the employee, often also including a reference
  • They are voluntary
  • Can be offered at any stage of an employment relationship

Our employment team outline terms for you to consider, should you be offered a settlement agreement of some kind.

Considerations Before Signing an Agreement

If your employer discusses the proposed termination of your employment with you, whether for redundancy or otherwise, and mentions the possibility of entering into a settlement agreement, it is important that you give serious consideration to and/or are aware of:

  • Your potential employment tribunal claims and what you will be giving up by entering into the settlement agreement (including the merits and strength of your potential claims);
  • Whether the payments being offered by your employer reflect the value of your potential claims (and are reasonable in all of the circumstances);
  • Ensuring you are receiving all payments that you are contractually entitled to;
  • You fully understand the terms and effect of the settlement agreement, including the promises that you may be required to make, and any continuing obligations you have to your employer; and
  • Any overly onerous obligations that are being imposed on you (over and above normal expectations and standard practice).

Expert Legal Advice

We advise on all of the above, together with consideration of the reasonableness of the offer, as well as assisting with the negotiation process.

In order for a settlement agreement to be valid, you will need to take independent legal advice on the terms and effect of the settlement agreement, plus its impact on your ability to pursue potential employment tribunal claims. As part of the terms and in recognition of this requirement, employers usually contribute to an employee’s legal fees.

If you require advice in relation to a potential settlement agreement that you have been asked to enter into, please contact Tracey Guest, Partner and Head of Employment here at Slater Heelis, leave your details for a call back or call us on 0161 969 3131.