What is a settlement agreement?

At Waterfront we advise on settlement agreements every week but for our employee clients, signing such an agreement can be a once-in-a-lifetime event.  If you have been offered a settlement agreement for the first time and you are finding the process confusing or daunting, here are some pointers.

A settlement agreement is a written contract between an employee and employer. Usually, it sets out the terms on which the employment relationship will come to an end, but it’s possible that the employment may have ended already.

The employer agrees to pay the employee a sum of money and the employee agrees not to claim anything further from the business or settle any claims which they could bring.

In some cases, the employee will have no viable potential claims anyway, but employers often require the finality of an agreement all the same, particularly where they have decided to be more generous than they need to be with the severance package.  In other cases, it will be a question of weighing up the value of the claims you might have against the offer of settlement on the table.

You can also expect there to be a number of other contractual provisions for the benefit of both parties, such as an understanding that certain matters will be kept confidential and that the parties will not bad-mouth each other.  An agreed reference is also typical.

Do I need to take legal advice?

Yes, in nearly all cases.  Because the agreement will waive your right to bring potentially valuable statutory claims, the law provides that you must take independent legal advice before you can enter into it validly.  Accordingly, it is standard for the employer to pay for this legal advice, often up to a certain limit.

If you are offered a settlement agreement, you can contact us for advice. On most occasions, the process is straightforward and you can expect the following to take place:

  • We will have an initial free of charge call with you to understand why you have been offered a settlement agreement and the general terms on offer. We will also explain our fees with you before we start work.  If you’re happy to instruct us, we can then arrange a time to meet with you to provide the required advice.
  • We ask that you send us your settlement agreement and employment contract before any meeting.
  • We will meet with you to explain the terms and effects of each clause in the settlement agreement. We will also discuss whether or not you wish to negotiate the offer or amend any clauses.
  • We will contact your employer with any proposed amendments.
  • Once you’re content to proceed, we will arrange for you to sign the agreement and send this to your employer.
  • We will send our invoice to your employer directly.

How long will it take?

This varies from case to case. For a simple agreement with no amendments, we could conclude the work and the agreement in under 24 hours. For more complex matters, it can take several weeks.