The Purpose of a Settlement Agreement

The Purpose of a Settlement Agreement

In employment law, a settlement agreement is an agreement whereby a current or former employee or worker agrees to waive or settle a claim (or, all possible claims) against the employer in return for a payment, usually on termination of employment.

Statutory requirements for a settlement agreement

  • The agreement must be in writing.
  • The employee or worker must have received legal advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on the employee’s ability to pursue the statutory rights in question before an employment tribunal.
  • The independent adviser must have a current contract of insurance, or professional indemnity insurance, covering the risk of a claim against them by the employee in respect of the advice.
  • The agreement must identify the adviser.
  • The agreement must state that the conditions regulating settlement agreements in the applicable pieces of legislation have been satisfied.

Negotiating settlement agreements

When negotiating a settlement agreement it is usual to specify that all communications should be treated as “without prejudice” and “subject to contract”. This is to ensure that:

  • The parties can speak freely in negotiations without fear of anything said being used in evidence against them should the negotiations break down; and
  • Neither party is legally bound by anything “agreed” in the negotiations until a final written agreement is actually signed.

Costs

Employers will normally contribute towards legal fees for the benefit of achieving ‘insurance’ against claims and also of certainty.

If you have any questions or have been provided with a Settlement Agreement, we will be pleased to assist.

To arrange an appointment or to discuss anything regarding Employment Law  please contact our team on 01256 320555 or email mail@clarkeandson.co.uk.

 Irfan Dad

Employment & Litigation Paralegal

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