A Settlement Agreement
As an employee, if you have a complaint against your employer which could be taken to an Employment Tribunal, your employer might try to settle that dispute to stop you from making a claim, or taking an existing claim any further.
A Settlement Agreement is a legally binding agreement between you and your employer. It usually provides for a payment to be made to you by your employer, in return for your agreement not to pursue claims against them in a Tribunal or court. Youremployer will usually require you to keep the terms of the agreement (e.g. the amount of the payment and the surrounding circumstances) confidential.
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As Settlement Agreements are governed by the Employment Rights Act 1996, you should be aware of the various protections afforded to you under UK law where agreements of this nature are concerned.
For example, a settlement agreement will only be recognised in law if a qualified lawyer, certified trade union official or advice centre worker has signed it off.
Our specialist employment solicitors can advise you on the merits of your claim, and the amount of money you would likely receive if you were successful at an Employment Tribunal. They can advise you on the terms of the settlement agreement and may be able to help you negotiate a more substantial payment from your employer.
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Why do employers use Settlement Agreements?
Employers may offer a Settlement Agreement when they want to terminate an employee’s employment on agreed terms, with no opportunity for the employee to take them to court or a Tribunal.
There are a range of scenarios in which Settlement Agreements are used. For example, an employer might propose a settlement agreement where they do not want to go through a long, drawn-out process (e.g. a performance management process) before being able to end an employee’s employment. They might also propose a settlement agreement as part of a redundancy process.
Can you refer to a Settlement Agreement being offered to you if you reject the offer?
An employer can ask to have a protected conversation with you under section 111A of the Employment Rights Act 1996. If you agree to have a protected conversation with your employer, the content of that conversation cannot be referred to in an unfair dismissal claim if you reject the offer made by your employer and take your complaint to the Tribunal. However, if you have a discrimination claim or an automatic unfair dismissal claim, such as one relating to whistleblowing, then any related ‘off the record’ conversation could be brought to the attention of an Employment Tribunal.
For example, if you were offered a Settlement Agreement because you informed your employer that you were pregnant, or because you are an older employee and your employer is encouraging you to retire, then the content of any related protected conversation would be admissible at Tribunal.
Your employer may also ask to have a “without prejudice” conversation with you, but there are special rules which dictate whether such a conversation will be ‘off the record’ or admissible in court or at the Tribunal. Furthermore, if there has been ‘improper conduct’ by your employer, then they may not be able to keep offers and negotiations in relation to a potential settlement agreement secret. Improper conduct includes bullying, harassment, intimidation and blackmail.
Your employer also has to give you a reasonable period of time to consider whether to accept a written offer of settlement. Acas recommends 10 days.
Can your employer dismiss you if you do not accept aSettlement Agreement?
If you have more than two years’ service with your employer, they must follow a fair and reasonable process before dismissing you and can only do so if they have a fair reason. If they dismiss you for not accepting a Settlement Agreement, that will not be a fair reason.
What sort of payments might I receive under a settlement agreement?
- A Settlement Agreement will include a full breakdown of payments due to you, and also whether any sums will be paid free of tax.
- Notice pay - if your employment is being terminated, aSettlement Agreement will generally deal with your notice pay and confirm whether you are going to work your notice or be paid in lieu of it.
- Bonus and commission - if you are due bonuses or commission, then the amounts owed should be set out in the Agreement - a solicitor should check to ensure all contractual bonuses and commission are paid in full.
- Pension - whether you’ll receive pension contributions in respect of your notice period will depend on whether you work your notice and what your contract says.
- Medical and life insurance - some schemes will allow you to remain in them for the period up to which your employer has paid. Other schemes will require this benefit to terminate on yourlast day of employment.
Our experienced solicitors are specialists in Employment Law. We will advise you fully on the implications of signing a Settlement Agreement, and endeavour to ensure you obtain a sum that represents the strength of your potential claims. We can also advise you on references and restrictive covenants.
