Creating an amicable and professional agreement promises safety from the threat of an Employment Tribunal
Settlement Agreements, formerly known as Compromise Agreements, are legally binding agreements. They set out the terms and conditions agreed between parties (normally employer and employee) when they agree to settle a potential employment tribunal claim(s).
The Settlement Agreement confirms the finalised financial settlement terms agreed between the parties, for example, to dissolve the working relationship. The Settlement Agreement must meet all legal safeguards. Failure to do this could result in the employee walking away with the settlement money as well as lodging an employment tribunal claim.
Important things to consider:
- Generally an employer and employee/ex-employee enter into a Settlement Agreement. However, they can also be between an employer and a worker. For example, a complaint about holiday pay.
- We tailor every Settlement Agreement to reflect the individual circumstances of the case in question.
- The Settlement Agreement will not be legally binding unless the employee in question has taken advice from an independent legal or qualified advisor.
- The employee (or former employee) usually receives some form of financial payment. An employee would also often receive a reference as part of the agreed terms;
- They are entirely voluntary- they include terms and conditions that are mutually agreed, and parties do not have to enter into them if they do not wish to do so;
- They are often reached through a process of discussion and negotiation. The parties do not have to accept the terms initially offered – there may be a process of negotiation during which both sides make offers and counter offers.
- To bring an employment relationship to an end in a mutually agreed way – they are often used in situations where an employer and employee feel that their employment relationship is no longer working and a clean break is the best way forward;
- To reach an agreed and final conclusion to a workplace issue/dispute which doesn’t cause an employment relationship to end. For example, a grievance or potential discrimination claim/complaint.
- It draws a line under a difficult situation;
- It guards against future claims as well as reducing the risk of potential adverse publicity;
- Can provide a swift and dignified end to an employment relationship that is not working;
- It avoids time, cost and stress involved for both parties in a Tribunal claim;
- You can use it at any stage of an employment relationship;
- It can help you avoid having to undergo lengthy time consuming disciplinary and/or performance improvement plans;
- It can help you keep the circumstances leading to the termination of your employee’s contract and/or the terms and payment offered confidential;
- Preventing the employee from making disparaging remarks;
- Reaffirming their post-termination covenants;
- You’ll find peace of mind knowing that they cannot pursue a claim against you in the Tribunal or Court (so long as you have not misrepresented the reason for termination).