Settlement Agreements are becoming more and more common. Most often they are used in cases of redundancy, unfair dismissal and discrimination.
Most employment acts, such as The Equality Act 2010 sets out the criteria required for a valid Settlement Agreement. The Agreement will give a full breakdown of the payments the employee is to receive; including what portion is of tax. It will also include a list of statutes under which the employee must not bring a claim. The Settlement Agreement is in full and final settlement of all claims so these prohibitions must be listed clearly and separately by the employer.
Employment Law Dundee regularly advise employees on the terms of such Settlement Agreements and can assist in negotiating the drafting of such a document.
As Settlement Agreements become more common in the world of business, many employers and indeed employees are beginning to see them as an advantage when moving on from an employment opportunity or resolving a conflict in work.
Settlement Agreements are utilised in numerous aspects of work, from ending conflict disputes to prevention of business competition. Settlement agreements can be beneficial to all involved, but at Employment Law Dundee we understand they can be an overwhelming process. Therefore, we have highlighted the key aspects of a settlement agreement in order to aid clients in their understanding of the process.
What Is A Settlement Agreement?
A Settlement Agreement is a legally binding agreement (a contract) that sets out the terms of a settlement between an employer and an employee. A Settlement Agreement usually refers to a certain figure in order to end a dispute or agree a severance package, and can be much more cost effective for both parties rather than opting to solve the dispute through an employment tribunal or the courts.
While Settlement Agreements may seem like too good an offer to be true, it is important to note that it is necessary to take independent legal advice before entering into a Settlement Agreement. As such, most employers make a contribution to an employee's legal fees.
Why Are Settlement Agreements Often A Good Thing?
One of the advantages of receiving money through a Settlement Agreement is that it tends to be a payment to allow time to find alternative employment (usually around three months' salary at a minimum) and up to £30,000 of this payment is tax . This means that if you are leaving your employment, you could receive several months' salary to compensate for the lack of employment, or perhaps the short notice in which you have been informed.
Furthermore, conditions can be added to the agreement that benefit both parties and ensures that any conflict resolution or severance is conducted with dignity. Many private firms are opting to use Settlement Agreements as it protects them and their employee.
Employers can state in their Settlement Agreement that you are not allowed to work in the same industry for a certain period. This in turn will often result in a large sum settlement.
When Could You Be Offered A Settlement Agreement?
You could be offered a Settlement Agreement to resolve any of the issues below such as:
Settlement agreements can be offered in numerous circumstances such as:
- Performance related severance
- Long-term illness
- Dispute with bosses and peers
- Transfer of business or relocation
- Discrimination suit
- As a way of ending a long term grievance
- Any other legal issue that may arise through employment
It is also open to an employee to request a Settlement Agreement to end their employment. Although this is relatively rare in practice, our solicitors are experienced in negotiating in these circumstances.
Is a Settlement Agreement Final?
It is worth noting that you do not need to sign and agree to a Settlement Agreement just because it is offered. Indeed, they can be negotiated, amended and discussed openly with employers or those offering the deal to ensure it is the best option for you.
If you have a meeting regarding a Settlement Agreement, you will need to either bring legal representation or send a copy of the agreement to a solicitor before the document is signed. You need to take independent legal advice before entering into a Settlement Agreement.
On top of that, you can reject a Settlement Agreement. This will simply mean that you maintain your legal right to bring a claim against your employer in the future. Alternatively ir may force your employer to make a better offer.
Once you sign a Settlement Agreement, however, it becomes a legally binding document (a contract), and all of the conditions agreed upon must be upheld – so don't sell yourself short.
What should I do if I receive a Settlement Agreement?
Employment Law Dundee offers legal advice to employees. If you find yourself presented with a Settlement Agreement, you should contact us immediately. We will give advice on whether the offer made by your employer is fair and in your interests.
There are rules in relation to advice that employees must receive before agreeing to Settlement Agreements. These include being legally advised by someone with professional indemnity insurance. Employment Law Dundee are in a position to so advise and will give professional advice to guide you.
In addition to, and because of the requirement that employees receive legal advice, our services in this regard should not result in you having to settle our bill. In most cases, your employer will pay for the independent legal advice being given to you. However, you are our client and our advice is in no way compromised if your employer pays our fee.
What happens if I do not adhere to a Settlement Agreement once signed?
The law makes it clear that Settlement Agreements, once signed are binding upon both parties. Therefore, any breaches of conditions attached to the agreement will be viewed seriously. It is important to obtain professional, reliable advice on all conditions that your employer seeks to attach to any Settlement Agreement before you sign.
Contact us Today
If you have received a Settlement Agreement, we encourage you to contact our team straight away. You will need to take independent legal advice before entering into a Settlement Agreement and we can discuss your options and how to proceed in your best interests.