Briefly, a settlement agreement is a method for facilitating the end of employment by way of negotiating conditions and, typically, a sum of money in respect of severance. This is done in return for the employee not seeking redress against the company in a court or via a tribunal. However, it is not solely restricted to ending employment; settlement agreements can also be used in other situations, such as bringing an end to workplace disputes.
When faced with a situation where a settlement agreement is warranted for the purpose of terminating a role, it's likely that there may have been other business employment law options available prior to this, such as formal disciplinary/capability proceedings. Therefore, the terms of a settlement agreement for the termination of an employee's role need to be carefully considered. When used correctly, and to maximum effect, settlement agreements can be a very useful tool indeed for an employer.
Business employment lawyers
If you are considering drawing up a settlement agreement, solid legal advice is essential. The terms of the agreement will be binding and need careful consideration. The areas that a business employment lawyer will be able to advise you on include:
- how much money you should be offering as severance pay. This will often depend on circumstances, but it's important to weigh up how much the employee is likely to be awarded if the grievance goes forward to a tribunal or court case
- when that money will be due to be paid
- whether there are any extra issues to be dealt with; such as pensions, medical and life insurance or potential compensation claims for loss of office
Oratto has a number of highly experienced member business employment lawyers who will be able to assess your situation and advise you accordingly. Either choose a solicitor from the list on this page, or send your details directly to Oratto and we will use our Match function to identify the right lawyer for your needs.
Termination and settlement agreements
Making sure that settlement agreements are used appropriately is important. They usually come into play when ending the employment is not straightforward; there may be issues on either side of the fence. Settlement agreements allow the details to be kept confidential and they also provide a ‘clean break' scenario, allowing both parties to move on quickly and confidently.
However, there are many situations when it would not be appropriate to use one, and this needs to be considered carefully because, if that's the case, the employee may retain the right to refer to the terms of the proposed settlement agreement in an unfair dismissal claim, or in a formal grievance against the company. Your chosen solicitor will be able to discuss this further with you, as well as outlining the typical situations in which use of a settlement agreement is appropriate, for instance:
- when severance terms have been mutually agreed with the employee; a settlement agreement will provide a clean break
- to reduce the length of a redundancy process or to avoid a full disciplinary hearing
- if there are any ongoing issues, alleged events or similar, then a settlement agreement benefits all parties by being clear, firm and mutually enforceable
- an employee can also request a settlement if they feel that the trust in the employer/employee relationship has completely broken down, but it is not compulsory for an employer to accept
Benefits of a settlement agreement
One of the major benefits of settlement agreements is That they allow the exact details of the employment issues to be kept completely confidential (although this does depend on it being used correctly). It can also be very comprehensive and protect the employer from a number of scenarios, ranging from protection against derogatory comments to confirming the covenants which will be enforceable if termination of the employment goes ahead.
For more information, or to discuss your settlement agreement query with an expert business employment lawyer, contact Oratto today.