Settlement agreements solicitors

Sometimes referred to as “compromise” or “severance” agreements, settlement agreements are legally binding agreements that are entered into between an employer and an employee as a means of settling potential employment claims and also but not always terminating the employment relationship.

In order to be considered legally binding on the parties, settlement agreements must satisfy certain legislative requirements.  For instance, if the employee does not receive independent advice from a relevant adviser prior to the signing of the agreement, the agreement will not be legally binding.  Under the legislative requirements, a relevant independent adviser includes (among others) a qualified solicitor.

In the employment context,  settlement agreements are typically used to either (or both as the case may be) (i) terminate the employment relationship; and/or (ii) settle any claims or potential claims that an employee has (or may have) against their employer.

As such, settlement agreements will cover a variety of important issues that are subject to negotiation between the parties including:

• Contractual and statutory rights such as holiday entitlement, and notice pay/PILON
• the provision of an agreed reference for the employee after termination of employment;
• the arrangements for company property (including how this is to be returned and the condition of such property); and
• the arrangements in relation to pension entitlement;

The settlement agreement will also outline when payment is to be made to the employee following signature of the agreement, and also contain key provisions on the warranties that the employee is providing to the employer – which warranties the employer will almost certainly be relying on when entering the agreement.

Such warranties will likely include the employee warranting that they have not raised any formal proceedings against the employer (and that they have no intention to either).

These are extremely important sections of the settlement agreement, as the employer will almost certainly insist that any compensation payment made, is repayable as a debt (and likely immediately) where such warranties are breached.”