Settlement agreements can be a positive way to resolve a dispute. It ensures that both parties’ interests are met as far as possible, and avoids the time, cost and stress of an employment tribunal. However, a one-sided or poorly drafted settlement agreement may not be in your interests, and so you should not feel obliged to sign it.
There are several factors to consider before signing a settlement:
The payment – settlement agreements often come about when an employee may have a claim under employment law but agrees not to make it in return for compensation. You should therefore consider whether the amount is reasonable in comparison to what you may have received from a
tribunal. Bear in mind that you can never be 100% certain you will succeed at tribunal, and any potential compensation is not guaranteed. In other cases, an agreement may be offered where there has been a breakdown in relations or a redundancy situation. Here, you might consider the circumstances of the breakdown, the amount you are entitled to in statutory redundancy pay, or how long it will take you to find another job.
The terms – settlement agreements are a way to resolve all sorts of matters, aside from compensation. Agreements may vary widely but can include confidentiality clauses that stop you discussing the dispute or terms of settlement, non-competition clauses that will limit what you may do after employment ends or other restrictions. There may also be terms beneficial to you, aside from the payment, such as a positive reference. You must think carefully about whether the extent of the restriction is practical and fair, the benefits to you, and how these balance against the payment offered.
The alternatives – If you cannot reach an agreement and the underlying issue is a dispute with your employer, the case may proceed to tribunal. You should consider the time, cost and emotional investment required for a tribunal claim. It may be worth accepting a reasonable offer in order to avoid a tribunal.
Negotiation - If you are willing to reach an agreement, but aren’t happy with the terms offered, we can help you to attempt to renegotiate the terms. This will usually be quicker than a tribunal claim. Your employer is unlikely to pay for a solicitor to undertake this work, but the improved terms may cover the cost involved.
It is a legal requirement that you receive legal advice before signing a settlement agreement, and in most cases your employer will cover the cost of this advice. We will explain the terms of your agreement and their practical impact on you. We can also help you to consider the factors discussed above and advise on how strong your case would be if you are considering a claim to an employment tribunal.