What is a Settlement Agreement? | Employment Law

Settlement agreements or compromise agreements, as they used to be called, are commonly used but what are they? Here’s our Top Five Tips on Settlement Agreements:

1 – Simply put, Settlement agreements are a legal contract between an employee and employer which settles claims or potential claims against the employer, usually in return for money.

2 – For a settlement agreement to be legally binding, certain conditions must be met, including that the employee must take independent legal advice.

3 – Settlement Agreements are voluntary, therefore an individual employee does not have to sign one;

4 – Settlement agreements often cover standard issues, such as references, confidentiality and arrangements for the return of company property;

5 – In some cases, the money offered to the employee in a settlement agreement is conditional upon the employee doing or not doing something (eg not to discuss the circumstances of their departure or compete with their ex-employer).  Any failure on the employee’s part can lead to them having to repay any money received.

Employees often approach us saying they have “just been asked to sign and return this document” as a fait accompli.  Likewise, employers will often use a “one size fits all” standard template agreement which doesn’t meet their needs.

Every employment scenario is different and it is in the interests of both employer and employee for each Settlement Agreement to be tailored to the circumstances and fully understood by all.

Thursfields has a team of Employment Law Experts with offices in Birmingham, Halesowen, Kidderminster, Sedgley, Solihull and Worcester. Whether you are an employer or employee, it’s important you get the right advice at the outset.

For more information call Emma Monk on 0121 312 5178 or email emonk@thursfields.co.uk

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