Settlement Agreement


My employment contract has come to an end, should I be signing a Settlement Agreement?


Paul Cowdery, Partner and Head of Litigation and Employment Law at Clarke & Son replies,

Employment relationships come to an end and when they do employees will often be asked to sign a Settlement Agreement. As part of the process of this agreement the employee is required to take independent legal advice. This is typically paid for by the employer. At Clarke and Son we can provide this advice which includes explaining your legal rights and the impact of a Settlement Agreement.

What is a Settlement Agreement and what does it contain?

A Settlement Agreement is a method in which to end employment contracts. It aims to agree terms between employer and employee when terminating employment or settling potential claims that may arise from the termination of employment.

Secondly, this agreement will allow the employee to receive financial compensation for the loss of his or her job. In return for the compensation the employee must agree not to pursue further defined claims against the employer, which can come from the employment or its termination. This is the most important aspect from the employee’s perspective as it is unlikely that when leaving employment another employment opportunity is taken up elsewhere on the following day. Therefore, it is important that the employee receives advice in relation to any compensation proposed and whether this is fair and appropriate in their particular circumstances

The benefit to the employer is that the agreement represents finality and closure. It provides protection by removing the risk of an expensive employment tribunal claim from the employee. The agreement must contain which claims they wish to compromise. Certain claims such as future personal injury claims should not be compromised.

A settlement agreement has scope to include a written reference. This reference can ensure that the employee is aware of how the employer will be corresponding with future prospective employers. It is important to remember that the form of the agreement has few defined rules and for that reason scope for negotiation on the terms are wide.

Is independent legal advice required for a Settlement Agreement?

Given the significance of the waiver, legislation requires the employee to obtain independent legal advice on the agreement prior to signing. Solicitors specialising in employment law offer this advice. Some other specialist professionals are also able to advise.

As the legal advice is essential for the agreement to be valid the employer will invariably make reasonable contribution to the employee’s legal costs. This contribution towards legal costs will be outlined within the agreement. Ordinarily this will satisfy the majority if not all of the charges incurred when being advised on the terms and effect of the settlement agreement.

What to do when you are presented with a Settlement Agreement?

If you are presented with a Settlement Agreement you can contact our First Contact Team to arrange an appointment to review this document. We also recommend having a copy of your employment contract available for this meeting, should any issues arise relating to it.

If you have a query or would like to book an appointment please get in touch with our First Contact team on 01256 320555 or email