What is a Settlement Agreement? Formerly known as a Compromise Agreement

This is a legally binding agreement which is considered a mutual agreement between the employer and employee. It is provided in lieu of termination of employment either by reason of redundancy, by agreement or in settlement.

Employers are frequently using compromise agreements as a method of preventing potential future complaints to a tribunal, especially in redundancy situations.

Why would an Agreement be necessary?

An employer can only protect itself from an employee bringing a complaint to a tribunal after redundancy or a dismissal by having them sign away their right to do so in a Settlement Agreement. This can only really be done in a Settlement Agreement and has the effect of turning the redundancy package or potentially unfair dismissal settlement offer into a "full and final" settlement of any claims the employee has against the employer. Likewise if there has been any internal grievances or disciplinaries a Settlement Agreement can ensure a swift resolution without any come back for either the employer or the employee.

Why would the Employee need to see a Solicitor?

For a Settlement Agreement to be binding the employee must be advised as to its contents. The Employment Rights (Dispute Resolution) Act 1998, provides that such advice can only be given by a qualified lawyer, a qualified trade union official, or a qualified advice centre worker, all of whom must be covered by an appropriate certificate of indemnity insurance. The lawyer will advise the employee on whether the terms of the Settlement Agreement offer sufficient protection and should also advise on the level of compensation which would be reasonable in the circumstances. This is calculated by the number of years the employee has worked, the salary and most important of all, the reason for the termination, dismissal or redundancy.

An employer will also be required to contribute to the employee's reasonable legal costs and this will be stated in the Settlement Agreement terms.

Why choose us to advise you on the Settlement Agreement?

A City Law Firm Limited can draft tight and comprehensive Settlement Agreements and handle all negotiations on your behalf. We make the potentially laborious process of reaching a settlement swift and stress free. We also have a successful track record of negotiating Settlement Agreement terms; settlement sums and favorable references on the employee's behalf.

Whether you want a Settlement Agreement or already have a draft Settlement Agreement give us a call for an initial chat.