Settlement Agreement Advice For Employers

What is a Settlement Agreement?

A Settlement Agreement between employer and employee is a legally binding settlement usually offered shortly before or after the termination of employment. They used to be known as a Compromise Agreement.

Benefits of using a Settlement Agreement

• Employment Settlement Agreements allow for a clean break in the employment relationship where your employee agrees to waive their right to bring claims in return for an agreed sum of compensation
• They can also be a speedy, efficient and pragmatic way of ending the employment relationship between you and your employee
• A properly worded Settlement Agreement, drafted by an expert employment lawyer, will mean that you have complete peace of mind as your former employee will not be able to bring any claims against your company

Risks of using a Settlement Agreement

• If an employment Settlement Agreement is introduced, particularly in relation to a workplace discrimination claim, contents of the Settlement Agreement and the way it is given to your employee may become admissible evidence as part of any Employment Tribunal proceedings. Protected characteristics which may result in a discrimination claim are wide-ranging since age was added in 2006, as this applies to both the younger and the older employee.
• If you circumvent a fair process such as a capability, disciplinary or redundancy procedure without offering sufficient compensation for this, your employee may refuse to sign and may have strong grounds for negotiating a higher settlement or instigating formal workplace procedures such as a grievance in order to bring a claim in the Tribunal
• The relationship of trust and confidence between you and your employee may be destroyed if the way in which the Settlement Agreement is offered is badly managed. In some cases this may affect the morale of your entire workforce

Best Practice Advice

Before offering an employee or a number of employees Settlement Agreements and compensation, you should identify where the risk of any future claim may lie and assess your potential financial liability. It may also be wise to use a Settlement Agreement where an ex-gratia payment is being made, as in the case of redundancy. This is to ensure that no further claims for compensation can be made against you and/or your company.

In certain situations it may be necessary to commence “best practice” procedures such as a formal capability, disciplinary or redundancy process so that the matter can be resolved in such a way that there is minimal financial risk to the company. We often find that it is the employee who requests some type of Settlement Agreement as an alternative to a more formal and drawn-out process.

Recently, there has been concern about Non-Disclosure Agreements being used to try and silence whistleblowers and women making allegations of sexual assault. Any confidentiality clause which tries to stop an individual talking to the police or a regulator will not be legally binding.

How we will help

We offer comprehensive Settlement Agreement advice from expert employment lawyers to ensure your business is protected. In the first instance, we will thoroughly explore the background issues behind the Settlement Agreement. Consideration will be given as to whether it is appropriate for you to offer a Settlement Agreement, particularly where there may be a possible discrimination claim. We will work with you to ensure there is no unintentional discrimination in any aspect of your process. We also review any outstanding contractual, redundancy, disciplinary, capability and grievance matters before advising on a suitable settlement sum.

We will also make sure that in situations where your employee is alleging fraud or making allegations which could be prosecuted in a criminal court, such as sexual assault, that you take a Best Practice approach by supporting them in their decision as to whether to take further action. This will ensure that you do not inadvertently breach any regulatory codes of conduct.

What are the Settlement Agreement legal costs?

If you are considering offering a Settlement Agreement please contact us. We are more than happy to have a free initial chat with you to point you in the right direction. Our advice will mean you are ready to make an informed decision about how you wish to proceed.

Our fees for a well-drafted Settlement Agreement are usually between £500 and £1,500 (plus VAT), depending on the complexity and breadth of the issues. For example, whether you are reiterating existing or even introducing new post-termination restrictions to protect your business. In addition, you will usually be expected to pay a contribution towards your employee’s legal fees, usually between £350 and £500 (plus VAT).

Where possible we will offer you a fixed fee price for a tailor-made Settlement Agreement advice package which will include drafting the document and also negotiations with the employee’s legal representative.

We also offer a multiple redundancy Settlement Agreement sign-off service for employers and trade unions. The service offers a professional and efficient way to sign off multiple Settlement Agreements.

Contact us today on 01273 609911, or email info@ms-solicitors.co.uk.