A settlement agreement can help you end a dispute with your employer or employee on positive terms, saving you the stress and disruption of going to an Employment Tribunal.
At Lewis Denley, our specialist team of employment law solicitors can provide clear, practical advice about sorting out workplace problems, including redundancy issues, discrimination and harassment claims, and pay disputes.
We will always put your best interests first and help you negotiate an agreement that allows you to move on from the situation feeling confident and secure.
Our settlement agreement solicitors’ expertise
A settlement agreement can help you resolve a vast range of issues and our expertise covers all types of employment law matter, including:
- Unpaid wages
- Employment contract disputes
- Grievances and disciplinary procedures
- Discrimination and harassment
- Unfair dismissal
- Wrongful dismissal
- Constructive dismissal
- TUPE (Transfer of Undertakings)
We provide advice to both employers and employees, giving us unique insight into the risks and concerns facing both sides. This allows us to help individuals and businesses take a pragmatic approach to employment law issues, giving them the best possible chance of reaching a solution swiftly and cost-effectively.
What is a settlement agreement?
A settlement agreement is a legal contract between an employee and an employer that resolves specific workplace issues that have arisen in the course of employment.
Typically, they are used to officially settle any legal claims and bring the employee’s employment contract to an end. In return for giving up their right to make a claim to an Employment Tribunal, the employer will usually pay the employee a sum of money and may agree to other terms, such as to provide a future employment reference. The employee will usually also have to agree to keep the dispute and the contents of the settlement agreement confidential.
Settlement agreements for employers
The benefit of entering into a settlement agreement with your employee is that you will avoid the costly and disruptive process of defending Employment Tribunal proceedings.
Even if you win your case at a Tribunal, there is no guarantee that you will be able to recoup your costs as parties may be asked to bear their own costs. Therefore, although you will likely have to pay your employee a sum of money to settle the matter (which can feel counter-intuitive if you do not accept their claims), it is likely to be much cheaper than litigation.
Settlement agreements are also confidential while Employment Tribunal proceedings are public, so entering into one with your employee could help protect your reputation.
Settlement agreements for employers FAQs
Are settlement agreements legally binding?
A settlement agreement will be legally binding so long as you fulfil certain requirements, including:
- It must be in writing
- It must have been voluntarily entered into
- It must be signed by the employee
- It must specify the claims and issues the agreement is settling
- The employee must have received independent legal advice on the terms and effect of the agreement
- Their independent legal advisor must be fully qualified and covered by insurance
- The agreement must state that these legal requirements have been satisfied
We will ensure that your settlement agreement satisfies every legal requirement to ensure you are safe from any future claims by your employee.
Can my employee take me to an Employment Tribunal after signing a settlement agreement?
A key part of any settlement agreement is to bring employment claims to a conclusive end. By signing an agreement, your employee will agree to waive their grievances, meaning they will not be able to take you to an Employment Tribunal (unless you fail to fulfil your obligations under the agreement).
This is why it is a legal requirement for the employee to get independent legal advice before signing an agreement.
Do I have to pay my employee’s legal fees?
No. However, for a settlement agreement to be valid, the employee must have received independent legal advice. Therefore, some employers choose to pay some or all of their employee’s legal fees to ensure this requirement is fulfilled. We can provide further practical advice about whether contributing to your employee’s legal fees may be beneficial to you.
Settlement agreements for employees
Going through an employment dispute can be immensely stressful. Entering into a settlement agreement could help you avoid dragging out the situation for any longer than it needs to go on for. Our priority will be to ensure that any agreement you sign is fully suited to your needs – that is, we will never encourage you to settle for less than you deserve just because it is ‘easier’.
We will fully explain the terms of the agreement to you so you know exactly what you are signing and what the effect will be. We can also help you further negotiate terms to ensure the agreement is beneficial to your interests. For example, we can try to negotiate a term that requires your employer to give you a good reference.
We can also provide advice on the prospect of an Employment Tribunal claim and whether this may be more appropriate for you in the circumstances.
Settlement agreements for employees FAQs
Do I need a solicitor to get a settlement agreement?
Yes. It is a legal requirement that you receive independent legal advice from a qualified, insured lawyer. Otherwise, your settlement agreement may not be valid and you will not be able to enforce it, for example, if your employer fails to pay your agreed compensation.
Can I ask my employer for a settlement agreement?
Yes. You don’t have to wait for your employer to offer you a settlement agreement. If it is the best option for you, we can liaise with your employer on your behalf to request and negotiate an agreement.
Can my employer give me a bad reference after signing a settlement agreement?
Many settlement agreements include a term that requires the employer to provide a reference. However, there is no legal requirement to include such a term.
We will always provide advice on getting a reference clause included in your settlement agreement as well as drafting the specific wording of the reference so you know exactly what your employer will say if asked by your future employer to provide one.
Can I take my employer to an Employment Tribunal after signing a settlement agreement?
If the settlement agreement is legally valid, you will have agreed to waive your claims. This means you will not be able to take them to an Employment Tribunal unless they breach the terms of the agreement (for example, they fail to pay you the agreed compensation).
How much does a settlement agreement cost?
We aim to provide proportionate, flexible funding arrangements for our employment law clients, including offering fixed fees wherever possible.
In many settlement agreement cases, employers are prepared to cover some or all of the employee’s legal fees to ensure they receive independent legal advice. We can provide further advice on this.