Settlement agreements 

A settlement agreement is a special kind of contract between an employee and an employer. It’s an exception to the general rule that a person cannot give up his or her rights to make a claim in an employment tribunal or a court. 
 
An agreement is a sensible way of resolving a dispute but any attempt to do this without following the rules on settlement agreements won’t work and the arrangement will be unenforceable - a good reason why you should seek legal advice early. 
 
The purpose of a settlement agreement is to record how the terms of employment will end or a dispute will be resolved. Those terms are usually that the employer will pay a sum of money in return for the employee giving up rights to make the employment-related claims set out in the agreement. 

The rules in brief are: 

Settlement agreements must be in writing and in a specified format. 
Settlement agreements must contain certain information stipulated by law. 
An employee must receive advice on the meaning and effect of the settlement agreement by someone qualified to do so, such as Spencer Shaw Solicitors. That advice must include the effect of the settlement agreement on an employee’s ability to make a claim to an employment tribunal. The cost of this advice is often covered by the employer. 

Settlement agreements are normally used: 

to end a disagreement between an employer and an employee at the end of employment 
to reach a negotiated compromise about how and on what basis an employee will leave 
occasionally they are used where employment continues but a dispute needs to be resolved 
 
Settlement agreements are used in many kinds of cases where employment law issues arise such as unfair dismissal or discrimination claims. They are also becoming increasingly common in cases of redundancy
 

Non-disclosure agreements 

Increasingly, non-disclosure agreements (NDAs) and confidentiality clauses are being used in settlement agreements. These clauses can be helpful where you want to protect business interests or sensitive information. However, due to some misuse, such clauses are now subject to additional regulation and a high level of scrutiny. 
 
It is important that businesses ensure they are using the clauses in a fair and transparent way. To misuse non-disclosure agreements could not only risk a legal challenge but would risk reputational damage. More than ever, it is vital that companies obtain legal advice. 

Get in touch 

Do you have a legal matter you'd like to discuss with us? Get in touch using the details below or use the form here and a member of our team will be in touch to discuss your enquiry. 
Phone: 0121 452 5130 
Address: Spencer Shaw Solicitors Limited 
Vancouver House, 111 Hagley Road, Edgbaston, Birmingham B16 8LB 
Opening hours: 
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