Settlement Agreements

Being presented with a Settlement Agreement can be a stressful experience. Many employees have never received a Settlement Agreement and for many it may be the only time they receive one in their working lives. For others, it may come as a welcome relief. Whichever it might be, it is essential that employees obtain independent legal advice as to the terms and effect of the Settlement Agreement.

A Settlement Agreement may be presented by an employer for any number of reasons. The employer may be in the process of making redundancies or restructuring and might offer the opportunity of voluntary redundancy. There may be an ongoing dispute with the employer and a Settlement Agreement has been presented as a possible means to settle the dispute.

A Settlement Agreement in essence sets out the terms upon which the employee’s employment will be terminated. Provisions will usually be made for, amongst other things, the amount of money that will be paid to the employee and any benefits that they may receive in exchange for the settlement of most, if not all, of the legal claims the employee has or might have against the employer. A Settlement Agreement may also deal with such matters as the requirement for both the employee and the employer to keep the Settlement Agreement confidential and for the return of all property belonging to the employer.

An employee in receipt of a Settlement Agreement should obtain independent legal advice as soon as possible. The Settlement Agreement may be open for a limited period of time after which the offer may be withdrawn by the employer. Employers should ensure that employees obtain independent legal advice even if the employee insists they do not need it. The reason for this is unless the employee obtains independent legal advice any claims they have will not be legally waived or settled even if they sign and return the agreement, which means the employer remains vulnerable to a claim.

In some instances it may be the case the employee does not agree with some of the terms proposed by the employer. In such circumstances the employee may want to consider instructing their independent legal adviser to negotiate improved terms of settlement with the employer. The employer may or may not agree but this normally is a matter for negotiation between the parties.

It is usually a term of the Settlement Agreement that the employer contributes to the payment of employee’s legal fees. This is normally a nominal contribution and in many cases would cover the cost of the independent legal adviser considering the Settlement Agreement and meeting with the employee to discuss all the terms of the agreement. In most cases entering into a Settlement Agreement does not cost the employee anything.