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3 things you need to know about settlement agreements

1. Settlement agreements are legally binding.

They came into effect in 2013 and are contracts that are used to end an employment relationship between the employer and employee.

The agreement must be in writing and it is a completely voluntary procedure. Employees must be given a reasonable amount of time to consider the offer and the ACAS Code of Practice suggests providing employees with a minimum of 10 calendar days to consider the proposed formal written terms of a settlement agreement and to receive independent advice, unless the parties agree otherwise.

2. They will usually waive an employee’s right to bring a claim covered by the agreement, for example in a tribunal or court.

For a settlement agreement that waives an individual’s right to bring legal proceedings to be valid, certain legal conditions must be met:

The agreement must be in writing and the employee must receive independent advice from a relevant adviser. There may be a cost involved in obtaining such advice and employers may wish to offer to pay any such fee, or a contribution towards it.

Settlement agreements can include clauses whereby each party agrees to keep the terms confidential and agrees not to make disparaging comments about each other.

A settlement agreement is a useful tool available to an employer and provides some certainty that generally speaking an employee will be unable to bring a tribunal claim.

If any provision of a settlement agreement is not honoured, for instance, if an employer does not pay the employee the compensation set out in the agreement, or an employee fails to abide by an agreed confidentiality clause, then the remedy is usually to claim breach of contract and damages in the County Court.

3. They are usually reached through a process of confidential discussion and negotiation

Employers can open up settlement discussions with employees at any time. It is usually helpful to put any offer in writing so that any misunderstandings are avoided.

The employee needs to be given reasonable time to consider an offer of a settlement agreement. What is reasonable will depend on the circumstances of each case, including what both parties might agree is a reasonable time.

A settlement agreement is made between two parties, the employer and the employee, but the employee may want to involve someone else in the discussions. Whilst not a legal requirement, it is good practice to allow employees to be accompanied at the meeting by a work colleague, trade union official or trade union representative. Allowing the individual to be accompanied may help to progress settlement discussions.

If you need help and advice in relation to settlement agreements, please do not hesitate to contact me or the employment team on 0113 350 4030 or at hello@scesolicitors.co.uk

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SCE Solicitors is a boutique employment law practice based in Leeds which advises clients nationwide.  Please note that the information in this blog is to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with SCE Solicitors or other professional counsel before acting on the information contained here.

Jennifer Hoult
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