Settlement Agreements for Employers
A Settlement Agreement (once known as a Compromise Agreement or Non-Disclosure Agreement) is the opportunity for an employer to end an employees employment. The Agreement usually stipulates that an employee will not pursue any legal claim and on occasion can offer a settlement/termination amount for the loss of employment. If, as an employer, you wish to provide an employee with a Settlement Agreement then it must be on the basis that the employee seeks independent legal advice at a cost to the employer. Legal fees for approving the Settlement Agreement can range from £200-£750.00 plus VAT.
Settlement Agreements for Employers
A Settlement Agreement is a legal agreement terminating the employment relationship on specific terms and conditions.
A Settlement Agreement may be the result of a protected conversation (when there are no issues outstanding but an employer wishes to end the working relationship). Or, on a without prejudice basis where there are ongoing issues in the work place and as an alternative to, say disciplinary action, a Settlement Agreement is the preferred method of exit from the business.
Who Can I Offer A Settlement Agreement?
A settlement agreement can be offered to all employees and usually follows on from a protected conversation or without prejudice conversation with the employee and seeks their agreement to settle matters by way of an agreement.
Employers seeking to make settlement agreements are advised to seek legal advice before doing so. Although a settlement agreement may seem an easy option, there are grounds for an employee to argue the legality of such an agreement if, for instance, the employer has acted unlawfully or used duress to procure an agreement.
Are Settlement Agreements A Way To Resolve An Employee Tribunal?
A settlement agreement/COT3 (a legally binding document issued by ACAS) can be used as a compromise to an employment tribunal case; to settle the case and issues without incurring the expense and time of a full hearing.
What Makes a Settlement Agreement Legally Valid?
For a settlement agreement to be legally binding, the following conditions must be met:
- The agreement must be in writing.
- The agreement must relate to a particular complaint or proceedings. However, if there are no ongoing proceedings, often the Agreement will state that the employment has ended due to mutual agreement of the parties.
- The employee must have received advice from a relevant independent adviser, such as a Solicitor or a certified and authorised member of a trade union.
- The independent adviser must have a current contract of insurance or professional indemnity covering the risk of a claim by the employee in respect of any losses arising from the advice.
- The agreement must identify the adviser.
- The agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.
- Once a legally binding settlement agreement has been signed, the employee will be unable to bring an employment tribunal claim in relation to any type of claim that is listed on the agreement.
How Is a Settlement Agreement Packaged Calculated?
A Settlement Agreement will usually include a number of months salary (2-3) for loss of employment together with notice and holiday pay.
If the employee had any other benefits then these may be included in the Agreement. It is a good idea too to obtain a reference. This would usually be a standard reference unless the employer was able to provide a subjective one.
