What should you do if you receive a settlement agreement?

Lodders’ employment law specialist, outlines the steps you should take if you are offered a settlement agreement by an employer.

What is a settlement agreement?

A settlement agreement is a legally binding contract between an employee and an employer. It can be used to end employment on agreed terms, and often, in return for you waiving your right to pursue any claims in an Employment Tribunal or a Court, you will be offered some form of compensatory payment as the employee. It is likely that your employer will want you to keep the agreement confidential.

Many different terms are used to describe settlement agreements, such as compromise agreements, redundancy agreements, and termination agreements.

Rejecting a settlement agreement

You do not have to accept a settlement agreement, but you can often still be dismissed by your employer regardless.

If you turn a settlement agreement down, you may be able to bring a claim against the employer, but it is not guaranteed you will be awarded as much money as you were in the initial termination agreement. It is therefore important to seek out legal advice when you are offered a redundancy agreement.

Seeking independent legal advice before accepting an offer

If your employer offers you a settlement agreement, you will need specialist legal advice to help you decide whether or not to accept it – and in some instances, how and where it can be improved to your advantage.

In fact, redundancy agreements are not legally effective unless the employee has received independent legal advice about the terms of the agreement. Employers often agree to pay a sum towards these legal fees.

First steps

In our experience of helping scores of individuals to negotiate strong terms on termination of employment, the offer of a settlement agreement is often the start of a negotiation, not the end. Lodders’ specialist employment solicitors can advise on the merits of your claim, and the amount you would be likely to receive at a Tribunal. They can also advise on any discrimination against yourself that you may not be aware of, such as protections under the Equality Act, for example.

Understanding your termination agreement

Seeking independent legal advice ensures you will fully understand the terms of the termination agreement, and how they will affect you.

A solicitor will be able to ensure the document is drafted so as to protect you interests, and where possible, remove restrictions on your future conduct, and obtain the most favourable compensation amount in an efficient manner.

More information

If you have been offered a settlement agreement, or would like more information on Lodders’ employment law services, please contact our Employment team.