What is a Settlement/Compromise Agreement?

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We are happy to negotiate or give expert advice on settlement agreements, regardless of the issue: discrimination, unfair dismissal to name but a few. In July 2013 the government changed the name of 'Compromise Agreement' to 'Settlement Agreement'. In employment law they are exactly the same agreements with just a name change.

1.      Introduction

In a settlement agreement, the employee basically agrees to waive (or compromise) his or her employment rights (e.g. not to be unfairly dismissed!) for money. The employer never admits liability, he simply pays an agreed sum. 

The terms of a Settlement Agreement and a reference is usually be negotiated between the parties (employer and employee) in private.

Employers pay towards the costs of the employee to get legal advice. The amount paid is variable. The more senior an employee the greater the cost.

 Correspondence regarding negotiation is often marked ‘Without Prejudice’; so disclosure of the attempts to settle is not permitted if the matter is never resolved and the parties end up in an employment tribunal.

2.      Validity of a settlement agreement

To be valid the agreement must:

·         Be in writing and signed by all relevant parties.

·         Specify the reasons for termination.

·         Details of the name and address of the legal advisor must be provided with confirmation of professional indemnity insurance and a      practising certificate.

·         Include the relevant statutory provisions that regulate the validity of the agreement.

3.      What would I expect to find in a settlement agreement?

·         Definitions of important terms

·         Full and final settlement clause

·         Clear evidence of the termination date

·         Payment up to termination date – compliance with notice period or holiday pay

·         Compensation payment

·         Additional benefits that may be offered for example outplacement counselling.

·         Confidentiality clauses

·         Derogatory/ detrimental statement clause

·         Indemnity clauses for example for tax or cost of hiring a lawyer if your employee sues

·         Warranties regarding the employees behaviour

·         Legal Advisor

·         Claims – a list of all that is compromised

·         Annexed a copy of the reference and documents to be signed by the legal advisor.

95% of our clients were happy with the outcome of their dispute.