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Employment Law Advice — Employees

Settlement agreements and compromise agreements

Settlement agreements, also known as compromise agreements, aim to assist reach a mutually agreeable terms to end an employment relationship before a dispute has arisen. 

What is a settlement agreement?

A settlement agreement is a legally binding contract that waives an individual’s rights, whether a worker or an employee, to make a claim covered by the agreement to an employment tribunal or court. 

Normally a settlement agreement will require an individual worker or employee to agree to waive or settle a claim (or, more usually, all possible claims) against their employer in return for a payment and other terms such as an agreed reference, usually on termination of employment.

Settlement agreements are used in a range of circumstances. It is likely that you will be asked to sign a settlement agreement if you are a working for an organisation whether as a worker or as an employee and you are:

  • Being made redundant
  • Going through disciplinary or performance proceedings and are looking to ‘do a deal’
  • Being offered severance terms on the termination of your employment
  • Involved with an existing dispute with the organisation you are working for which you would both like to bring to an end

Why do you need to take independent legal advice?

Certain employment rights and discrimination claims can only be legally waived or settled by way of a settlement agreement that meets certain legal requirements.  

One of those requirements is that the employee or worker must have received legal advice from a relevant independent adviser, such as a solicitor, on the terms and effect of the proposed agreement and its effect on the employee or worker’s ability to pursue the legal rights and claims in question before an employment tribunal.

Legal fees

It is common for an employer to make a contribution towards the employee or worker’s legal fees (although there is no statutory obligation for the employer to do so).  The level of contribution is usually between £250 plus VAT and £750 plus VAT depending on the complexities of the document.  Where possible, we will seek to negotiate with the employer on an individual’s behalf to cover the legal fees in full.  

Let us help

If you have been offered a settlement agreement or want to try to negotiate one, please contact us. Our team of specialist employment law solicitors are highly experienced in advising individuals on settlement agreements and in successfully negotiating better terms for clients. Our employment solicitors can advise you on the terms and effect of a settlement agreement you have been offered, seek to negotiate better terms for you or make an approach to your employer to request that they offer you a settlement agreement.