Settlement Agreements are a recognised way of bringing about the end of the employment relationship. This can be a useful way for a business to end their relationship with an employee or worker in an amicable manner, safe in the knowledge that no further legal action can be taken e.g. in a redundancy situation or as an alternative to pursuing performance management or disciplinary proceedings. It can be an effective way of resolving issues with difficult or problematic employees.
A Settlement Agreement is a document agreed between the employer and employee either after an amicable discussion or following a dispute which sets out the terms upon which the employment is to end. Usually there will be a tax-free payment from the employer as an incentive to enter into such an agreement. In return the employee waives their right to bring a claim against the employer for events that occurred during the employment relationship.
The terms of a Settlement Agreement usually include:
- Confidentiality clauses (the parties are not to discuss the terms of the Settlement Agreement)
- Non-derogatory comments (the parties are not to say or write anything which could damage the reputation of the other)
- An agreed reference
- Often, it is the case that the employer would make a nominal contribution towards the employee’s legal fees incurred solely in connection with signing the settlement agreement.
It is important that any discussions or communication with a view to a settlement agreement is conducted on a “without prejudice basis” to avoid this being permissible evidence in any Court or Tribunal process if an agreement is not reached.
If a business is seeking to offer a Settlement Agreement as an alternative to a dismissal, then it is important to hold a Protected Conversation with the employee to commence these discussions.
Our employment & HR specialists are on hand to guide you and advise throughout this process and to prepare the necessary documentation for you.
Free employment law clinic for businesses
Every Monday we run an ‘online employment law clinic’ for small businesses in South Yorkshire. If you have a question regarding employment law within your business email [email protected] on a Monday between 9am – 4pm and one of our employment experts will respond to you on the same day.
The Employment for Businesses team
Our Employment team, is renowned for its no-nonsense, energetic and pragmatic approach. Its success isn’t just down to its extensive knowledge of the law, it’s also the way we pride ourselves on putting our client first, getting to know you and understanding what you want to achieve. To get the best results for you and achieve commercially sensible outcomes it is essential that we understand your business.
The team is highly regarded, with recommendations from many clients. The professional guide, Legal 500, also ranks Howells employment team highly in Sheffield and South Yorkshire;
Legal 500 2018
"The 'friendly and approachable' employment team at Howells is known primarily for its representation of employees in tribunal claims. Clare Fowler and Tom Bernard jointly head the team, which is supported by head of civil litigation Graham Hogarth. Fowler has particular experience delivering discrimination advice, while Bernard is recommended for his 'balanced advice, thorough and clear communication' in relation to claims. The team has recently handled disability discrimination claims, in addition to unfair dismissal claims under TUPE. The practice also has experience acting for SMEs, including advising one employer on a complex redundancy matter."