Answering your questions regarding settlement agreements

  • What is a Settlement Agreement?

    A settlement agreement (formerly called a compromise agreement) is a legally binding document in which an employee waives their employment rights and agrees not to pursue any legal action against their employer/former employer, usually in return for some financial compensation or other benefits. They are often used to terminate an employment relationship by mutual agreement or to settle an ongoing dispute.

    Once a settlement agreement has been signed, you are unable to make any of the claims which are listed in the agreement. A settlement agreement will often contain confidentiality obligations and deal with any outstanding payments owed to you, such as holiday and notice pay.

  • Do I have to accept the offer?

    If you are not happy with the terms on offer or wish to continue your employment in any event, there is no obligation on you to sign the settlement agreement. You may feel that you have been given an unreasonable ultimatum or are being pressured in to signing the settlement agreement. The way that your employer conducts itself in the way it presents the offer and options available to you, should not result in you being subjected to undue pressure or improper behaviour.

    If negotiations are unsuccessful and you do not sign the agreement, you may or may not have grounds to bring a claim against your employer in an Employment Tribunal. It is important to remember that there is a strict time limit of 3 months less one day from the date of termination/last act of discrimination to do this, and any ‘off the record’ discussions regarding the agreement usually cannot be referred to in the legal proceedings.

  • Do I need a solicitor?

    In order for the settlement agreement to be legally binding on both parties, you must obtain independent legal advice on the contents. At Nelsons we will:

    • Ensure that you understand what you are signing;
    • Check that the document is appropriate in conjunction with your instructions; and
    • Where requested, work with you to secure the best possible outcome.

    It is important that you understand the legal effects of the settlement agreement and the impact on your employment and finances, as once you have signed it you cannot change your mind.

  • Do I need a face to face appointment to complete the paperwork?

    We regularly advise clients on a range of issues remotely and assisting with settlement agreements is no different. As long as you are able to provide us with the necessary paperwork we require and have access to a telephone and email, we can advise you on the terms and effect of the settlement agreement without the need for a face to face appointment.  

  • What will it cost?

    Your employer is likely to offer to contribute towards some or all of your fees in obtaining legal advice on the document. They usually offer a fixed sum, which will often be sufficient to cover advice on a straightforward settlement agreement, where you are happy with the terms of the offer.

    Where you require our assistance in improving the terms of the settlement agreement, or if the matter becomes contentious to the point where it looks like your fees will exceed the contribution on offer, we will seek to negotiate this figure up. If we consider it likely that there will be a balance payable by you we will discuss this with you in advance.

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If you have any other employment law queries, please get in touch with a member of our specialist team in DerbyLeicester and Nottingham. We offer a fixed fee one hour appointment which is charged at £200 + VAT.

Find out how Nelsons can help you. Contact our friendly team for a guaranteed fast response.

For advice and support 0800 024 1976