What is a Settlement Agreement?
A Settlement Agreement (previously known as a Compromise Agreement) is a legally binding document between an employee and their employer. A Settlement Agreement is a very useful tool often used to enable employees to settle any potential claims they may have against the company in return for financial compensation.
When are they used?
Under normal circumstances, and if eligible, they are used when an employee makes a claim against a company based on a breach of contract or under statute. Claims may relate to a number of issues, such as discrimination, recruitment, abuse of power or termination of a contract etc. Settlement agreements allow for the employee’s grievances to be dealt with quickly and out of court. This can be of huge advantage to a business, but it could also significantly reduce the employee’s stress and inconvenience of bringing the matter to court.
Businesses are most likely to use a Settlement Agreements in order to maintain their reputation, save time, money and also to gain clarity in an often challenging situation.
Main legalities of a Settlement Agreement
- The Settlement Agreement must be in writing.
- Before signing, the employee must have received legal advice from an independent adviser e.g. trade union official or qualified solicitor on the terms of the agreement.
- The independent adviser must be identified, sign the relevant certificate and have insurance in place.
How much does it cost to obtain independent legal advice on a Settlement Agreement and who should pay for it?
The costs of the independent legal advice and providing the relevant certificate are usually fixed and covered by the employer.
What to do when being offered a Settlement Agreement?
- Always seek independent legal advice, whether it is your local Citizen’s Advice Bureau, a trade union, or an employment law solicitor. Here at MLS we are experts on assisting clients with their Settlement Agreements and will be happy to help.
- Prepare well for your settlement negotiation meeting as you are given some time to think about your decision.
- Decide what your final limit would be in terms of compensation and have some reasons to back this up e.g. experience, competency, contributions made to the current workplace etc.
Usually, there is a clause within the settlement agreement known as the confidentiality clause or NDA clause, which provides a safety net for businesses and prevents employees from going public with their grievances and/or the agreement itself.
When do you actually receive the money?
This will depend on the terms of the agreement itself but once all parties have signed it, the payment is normally made within 7-21 days.
How MLS can guide you
- We will review the proposed agreement and discuss the best options for you depending on your individual case.
- We will look at your case and identify all possible areas for any claim and compensation. This is sometimes overlooked by employees who are going through a difficult time.
- We will help prepare you for the settlement negotiations.
- If you decide to go ahead with the Settlement Agreement, we will act as your certificate provider and independent legal advisor.