Settlement Agreements.

Settlement agreements are legally binding agreements between an employee and an employer, usually drawn up as a result of redundancy, to end an employment contract early, or as the result of an employment dispute.

When making a settlement offer, employers will offer employees an allowance used to seek independent legal advice. This is normal and the intent is to ensure employees know what they are agreeing to, and reduces the risk of disagreement over the terms for both parties. The allowance can vary depending on location and seniority, but typically falls between £200 to £1,000.

Settlement agreements typically include:

• Details of when your employment is to terminate and how it is to terminate, e.g. whether you work your notice period, receive a payment in lieu of notice, or are placed on garden leave
• A financial element, usually a lump sum payment, redundancy payment, and/or a payment in lieu of notice
• A waiver preventing the employee from raising a dispute following their departure from the company
• Releases from certain clauses within the employee’s employment contract, such as restrictive covenants or non-compete clauses
• A confidentiality clause preventing disclosure of the contents of the agreement and business information

Settlement agreements aren’t always a final offer, and often there can be room to negotiate more favourable terms for employees. If you need help with advice on a settlement agreement, call our experienced employment law team on 0203 007 5500 for advice.

Yes, just because you have been made a settlement offer through a settlement agreement, doesn’t mean you have to sign it. Our employment solicitors will walk you through your agreement to ensure you understand the terms and what you can and can’t do as a result of signing it.

While it may be unusual to reject a settlement agreement outright, they can often be negotiated. Here are your options if you are unhappy with the initial offer:

Negotiation

If you feel the terms and conditions of the settlement agreement are unfair or unsatisfactory, you can put forward a proposal to your employer. While you don’t necessarily need a solicitor for this, it can help to achieve a fair agreement and signal that you are serious about coming to a reasonable settlement.

Rejection

You don’t have to sign a settlement agreement, particularly if there are clauses that will prevent you from taking action further down the line. This may be an option if you have a particularly strong case against your employer, but it will depend on your personal circumstances.

However, be mindful if you reject a settlement agreement that an employer doesn’t have to offer one again in future, nor does it have to be on the same terms.

Request an extension

Usually, settlement agreements have a deadline by which you must respond to the offer. If you need more time to consider the offer, you can request this from your employer.

The most common areas in settlement agreements to negotiate are:

• Any pay or compensation packages, including enhanced payments
• Whether a reference is included and its wording
• Senior executive-level terms like directorships or partnerships, share options and non-compete clauses
• Payment of benefits such as commission or bonus payments if they would be paid after your date of departure
• The allowance allocated to you for seeking independent legal advice

Settlement agreements are legally binding and if one party breaks the terms and conditions of the agreement, the other party is entitled to take legal action.

This is why it’s important to take legal advice prior to signing a settlement agreement, to ensure it covers what you need it to cover.

If you have already breached the terms of your settlement agreement and need legal advice, please call us on 0203 007 5500.

This depends on your role type, why the settlement agreement is being offered and your seniority. In most cases, employers will provide a legal allowance ranging from £200 to £1,000 to cover the cost of seeking independent legal advice, meaning you won’t have to pay anything.

Our settlement agreement services include:

• Reading through the settlement agreement with you
• Clearly explaining all the terms and conditions of the agreement to you
• Highlighting any potential future consequences of signing
• Raising elements that you may wish to negotiate on, or non-standard clauses

We offer flexible fees for independent legal advice, meaning we can match your employer’s contribution in most circumstances.

Should you need to negotiate the terms of your agreement, this will sit outside of the independent legal advice we provide. Our employment solicitors can offer fixed fees, hourly rates and conditional fee agreements, depending on the nature of the negotiation.

Yes, settlement agreements include a certificate of independent legal advice signifying that you have taken legal advice on the agreement. This must be signed by a solicitor only after they have advised you on the agreement.

The intent behind the certificate is to ensure you fully understand the terms of the settlement and reduces risk of future conflict between you and your employer after you have signed the agreement.