What Is a Settlement Agreement
A settlement agreement is a legally binding contract between an employer and employee that settles the employee's claims in exchange for a payment and other agreed terms. Once signed, the employee cannot bring the claims covered by the agreement in any court or tribunal. You must receive independent legal advice before signing -- this is a statutory requirement.
Calculate Your Position First
The complete step-by-step guide: The Complete Employment Tribunal Claim Guide. Everything you need to act today, not next week.
Before accepting any offer, calculate what your claims are worth. The basic award, compensatory award, injury to feelings if applicable, and notice pay all form part of the calculation. An employer who makes a settlement offer has assessed the risk and found it material. Their first offer is rarely their best.
What to Check in the Agreement
The scope of the claims waiver is the most important provision. Ensure it covers only the claims you are intending to settle and does not inadvertently waive claims you have not raised or claims that have not yet arisen. Check the reference -- ensure the agreed reference is attached as a schedule. Check the confidentiality clause -- ensure it is mutual and reasonable.
What to Negotiate
In addition to the headline payment, consider negotiating: the wording of the agreed reference, removal of restrictive covenants, continuation of health insurance or other benefits, the contribution to legal costs (the employer usually pays), and the tax treatment of any payment over £30,000.
Independent Legal Advice
You must receive advice from a qualified independent adviser before signing. The employer usually pays a contribution to the cost of this advice. Do not rush -- take the time to understand what you are signing and what you are waiving.