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What You Need To Know About Settlement Agreements

Settlement Agreement

Settlement agreements are legally binding contracts that are used to end an employment relationship between the employer and employee. They came into effect in 2013 and they are used to stop individuals bringing a claim to a court or an employment tribunal.

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 unless the parties agree otherwise.

If a settlement agreement cannot be reached between both parties, the employer must consider a resolution depending on the dispute. The resolution can be in the form of performance management, grievance, disciplinary or mediation, whichever is deemed appropriate.

Alternatively, if there is an agreement in principle, the settlement agreement should be drafted identifying the independent advisor and provided to the employee to seek advice from the advisor such as a solicitor, or a certified and authorised member of a trade union.

Agreement In Principle

To reach an agreement in principle, employers must state to the employee that they are having either a without prejudice conversation or a protected conversation depending on the case.

So, you may be thinking, what is the difference?

Without Prejudice Conversation

A without prejudice conversation can only occur when there is an implied threat of legal proceedings raised by employees. Therefore, there must be an existing dispute in place. The without prejudice rule will protect employers from all tribunal claims but this will not cover improper behaviour. What constitutes improper behaviour is ultimately for a tribunal to decide on the facts and circumstances of each case.

An example of improper behaviour may be where the employer puts unnecessary pressure on an employee to consider or agree to the settlement agreement.  If the employee believes this is coercion, they may claim unfair dismissal and therefore, it is still ultimately the employment tribunals decision to confirm whether improper behaviour has occurred.  

Protected Conversation

The ‘protected’ conversation came in to force as an additional layer of protection under section 111a of the Employment Rights Act 1996. This was initiated so that pre-termination negotiations held between the employer and employee with a view to ending the employment on agreed terms cannot be used as evidence in unfair dismissal claims. The protected conversations can be used when there is no existing dispute in place, and this will only cover the employer for unfair dismissal claims. Therefore, there is no protection for any discrimination claims.

An example of this may be when the employer is not happy with a long term serving employee’s performance, so rather than going through the whole capability procedure, the employer may wish to give the employee an option of entering into a settlement agreement.

This may be raised by either party. Also, it is important to note that there is no protection for improper behaviour during pre-termination negotiations.

We understand that managing these situations can be quite difficult. For further guidance and support on having either a protected or without prejudice conversation, please contact us for further information. In addition, we can also help to draft your settlement agreement to ensure all relevant conditions are met for this to be a legally binding document, so please do not hesitate to get in touch.

If you need help and advice regarding a settlement agreement, please do not hesitate to contact me on 0113 350 4030 or at emma.roberts@scesolicitors.co.uk.

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SCE Solicitors is a boutique employment law and litigation 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.

Emma Roberts
Latest posts by Emma Roberts (see all)
Emma Roberts

Emma is a trainee solicitor at SCE Solicitors. Emma commenced her training contract in September 2018 and is currently working in the employment law department assisting director Samira Cakali. Emma also assists in the running of the firm’s myHR service where she can support you in the day-to-day management of your staff.

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