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Settlement Agreements

12 April 2019

Scott Sim

A settlement agreement is a legally binding contract between an employer and employee under which the employee agrees to waive their employment rights. Usually the employer will agree to pay the employee a sum of money and/or provide a job reference to a future employer in return for the employee agreeing not to bring a claim in an Employment Tribunal.

 Settlement agreements are often offered to an employee who is at risk of redundancy, either at an early stage in or at the end of a redundancy process. In such a case the employer will usually offer an enhanced redundancy package, over and above the employee’s statutory entitlement, as an incentive to the employee to sign the agreement. They are also commonly used when a manager is not performing but the manager’s performance might not be such that disciplinary proceedings are appropriate and/or the employer may wish to avoid lengthy and difficult capability procedures.

To be binding, the employee must take advice from a solicitor upon the terms of the agreement and the employer will invariably pay the employee’s solicitor’s fees.

Settlement agreements will contain confidentiality clauses such that the employee agrees not to disclose confidential information about the employer’s business to any third-party and further agrees to keep the terms of the agreement confidential and the circumstances that led to it. It is however important to note that settlement agreements cannot prevent an employee from making a protected disclosure (whistleblowing) or reporting criminal offences.

Employers will often include within an agreement additional post-employment restrictions such as a restriction upon the employee attempting to poach the employer’s customers or being involved in a competing business for a specific period of time. A small additional sum of money should be paid for these restrictions.

A relatively recent development in employment law is the permissibility of ‘Protected Conversations’. In a Protected Conversation the employer is able to speak to the employee ‘off the record’ in circumstances in which the employment relationship has broken down. If dealt with correctly, and in the correct circumstances, the employer can propose that the employee leaves the employer’s business on agreed terms without the employee being able to rely upon that conversation in any subsequent Employment Tribunal claim. These Protected Conversations are often concluded with the offer of a settlement agreement. It is however important that legal advice is taken before conducting a Protected Conversation as they can only be used when dealing with certain types of employment issues and the way in which the meeting/conversation is conducted should be in accordance with guidelines set down by ACAS.

If you are an employee who has been offered a settlement agreement by your employer or you an employer who wishes to offer a settlement agreement to your employee, then please contact

A settlement agreement is a legally binding contract between an employer and employee under which the employee agrees to waive their employment rights. Usually the employer will agree to pay the employee a sum of money and/or provide a job reference to a future employer in return for the employee agreeing not to bring a claim in an Employment Tribunal.

Settlement agreements are often offered to an employee who is at risk of redundancy, either at an early stage in or at the end of a redundancy process. In such a case the employer will usually offer an enhanced redundancy package, over and above the employee’s statutory entitlement, as an incentive to the employee to sign the agreement. They are also commonly used when a manager is not performing but the manager’s performance might not be such that disciplinary proceedings are appropriate and/or the employer may wish to avoid lengthy and difficult capability procedures.

To be binding, the employee must take advice from a solicitor upon the terms of the agreement and the employer will invariably pay the employee’s solicitor’s fees.

Settlement agreements will contain confidentiality clauses such that the employee agrees not to disclose confidential information about the employer’s business to any third-party and further agrees to keep the terms of the agreement confidential and the circumstances that led to it. It is however important to note that settlement agreements cannot prevent an employee from making a protected disclosure (whistleblowing) or reporting criminal offences.

Employers will often include within an agreement additional post-employment restrictions such as a restriction upon the employee attempting to poach the employer’s customers or being involved in a competing business for a specific period of time. A small additional sum of money should be paid for these restrictions.

A relatively recent development in employment law is the permissibility of ‘Protected Conversations’. In a Protected Conversation the employer is able to speak to the employee ‘off the record’ in circumstances in which the employment relationship has broken down. If dealt with correctly, and in the correct circumstances, the employer can propose that the employee leaves the employer’s business on agreed terms without the employee being able to rely upon that conversation in any subsequent Employment Tribunal claim. These Protected Conversations are often concluded with the offer of a settlement agreement. It is however important that legal advice is taken before conducting a Protected Conversation as they can only be used when dealing with certain types of employment issues and the way in which the meeting/conversation is conducted should be in accordance with guidelines set down by ACAS.

If you are an employee who has been offered a settlement agreement by your employer or you an employer who wishes to offer a settlement agreement to your employee, then please contact Scott Sim on 0114 242 1884 or Email Scott@taylorbracewell.co.uk