Settlement agreements – What to do when you receive one

October 13th, 2021

If you’ve never heard of a ‘settlement agreement’ before, that’s no surprise. For years, they’ve been known as ‘compromise agreements’ that once signed, prevent an employee from bringing any kind of claim against their employer, including an unfair dismissal claim. These agreements are usually put into action when things are not going well between an employer and an employee, or if there’s the prospect of redundancy on the horizon.

While everyone may feel that it’s for the best that a deal is reached before parting ways, a settlement agreement may be beneficial only to the employer, and leave the employee without adequate compensation or any recourse for constructive or unfair dismissal claims.

Before signing a settlement agreement, it’s vitally important to know what your rights are, whether the compensation being offered to you is adequate and whether you’re signing a fair contract without loopholes or excuses for your employer not to comply. It’s also a legal requirement that you get independent legal advice as part of the formalities, which can come from a union representative, the Citizen’s Advice Bureau, or an employment law solicitor. This is an essential safeguard, as an experienced employment law solicitor will be able to ensure that any settlement agreement on the table is fair to all parties, and whether or not you’ll lose any of your rights if you do sign on the dotted line.

If redundancy pay is part of the agreement then they may also be able to check that you are getting fair recompense and are receiving everything that’s owed to you, including untaken holiday pay or bonuses.

If your solicitor raises concerns, then it’s best to hold off signing until a compromise can be reached. If no compromise is on the table then you may need to go ahead with formal proceedings such as an employment tribunal.

Can I refuse to sign?

A settlement agreement is a serious, legally binding document that should never be entered into without a lot of careful negotiation and expert legal advice. Never feel that you need to sign there and then – the conciliation service ACAS states that there should be a minimum of 10 days to allow the employee to seek legal advice and to consider the terms of the agreement carefully. There may be mitigating circumstances that mean less time is available, but if that’s deemed to be unreasonable then it could be used as evidence of unfair dismissal in a tribunal.

Remember that once the settlement agreement has been signed that’s it – there’s no going back. The employee cannot then make any future claims against the employer regarding any matters covered by the agreement. So you need to be absolutely sure that the agreement is fair and that you understand the consequences of signing before putting pen to paper.

If you cannot come to an agreement then you have the option of an employment tribunal, which should be commenced within three months of the date of the termination of your employment.

Coming to an agreement

However, before you take that path, it is worth saying that settlement agreements, if they’re fair and reasonable, are an acceptable way to end a working relationship with your boss. The opportunity to negotiate a settlement that works for both parties will take some negotiation, but it is possible. To achieve that, it’s important to have that all-important legal advice from an experienced employment law solicitor.

A good deal should include not just severance pay, but the question of job references, a dignified exit from the organisation, and that you’re getting the best financial package including any pension or share dividends you may be entitled to should also be addressed and clarified.

Reach out to us for help and advice

We have award winning employment law experts who understand just how stressful redundancy or an acrimonious separation between employer and employee can be. We also understand the finer points of settlement agreement negotiation, and are here to offer our services to help parties come to a mutually beneficial conclusion. If you’re faced with the prospect of having to sign a settlement agreement and you’re not sure if it’s the right thing to do, contact us today for confidential, expert advice.