Settlement agreement advice for employees – common questions asked
In this article the Partner in the employment team, Chris Hadrill, covers 13 questions that employees regularly ask when he is providing them with settlement agreement advice. These questions are as follows:
- Why do you need a solicitor?
- How is a settlement agreement different to a compromise agreement?
- Why do employers offer settlement agreements?
- What should you do if you have been offered a settlement agreement?
- Who can you tell about the settlement agreement?
- What are the usual payments you should expect to receive?
- Is what you are being offered fair?
- Can you be fired if you refuse to sign a settlement agreement?
- Do you have to sign your settlement agreement? (and what happens if you reject it?)
- What happens when you reach an agreement?
- Why are you required to go to a solicitor for settlement agreement advice?
- When will you be paid under the agreement?
- How can Redmans Solicitors help you?
Why do you need a solicitor?
If you’ve been offered a settlement agreement by your employer then there are a number of reasons why you may need to consult a solicitor, including:
- A solicitor can use their experience to give you advice on the settlement agreement terms, based on their experience;
- It can often (although not always) be helpful to have a solicitor on your side – having a solicitor sending a formal letter or email to your employer can help to push your points across; and
- You will be required to get legal advice on the terms and effect of the settlement agreement (this is explained below)
Further reading: read our guide on settlement agreements
How is a settlement agreement different to a compromise agreement?
They are, essentially, the same thing: the Government changed the name of the contract from ‘compromise agreement’ to ‘settlement agreement’ a number of years ago, as they felt that employees were likely to be more interested in ‘settling’ claims than compromising.
Why do employers offer settlement agreements?
There are a number of reasons why an employer might offer a settlement agreement, including:
- It might be standard practice for your employer to offer settlement agreements to departing employees (so that any ‘loose ends’ are tied up)
- Your employer might want to make sure that you give certain commitments when you leave your employment, such as that you will return company property, that you won’t misuse confidential information etc. This can be achieved through using a settlement agreement
- You might have raised a complaint in the workplace, and your employer might be worried about you pursuing that complaint or bringing an Employment Tribunal claim
- Even if you haven’t raised a complaint, your employer might be worried about you bringing a claim against them (for example, they might have received advice from their solicitors that you may have a claim against them)
Ultimately, the main benefit for an employer of using a settlement agreement is that such agreements almost all claims (but not quite all) are settled under the terms of a settlement agreement.
What should you do if you have been offered a settlement agreement?
If you have been offered a settlement agreement then you generally have three options:
- Accept the terms of the settlement agreement without negotiation/amendment;
- Negotiate the terms of the settlement agreement; or
- Reject the settlement agreement and walk away from the negotiations
If you want to negotiate the agreement you can either do this yourself or ask a solicitor to provide you with settlement agreement advice.
I would generally recommend seeking to negotiate the terms of your settlemenemploymentt agreement, as normally (but not always) the reasonable worst case scenario for negotiation will be that the original offer made to you will still be capable of acceptance, and if you do manage to negotiate an increase to the settlement agreement then there is significant upside to doing so.
Who can you tell about the settlement agreement?
There will normally be a confidentiality clause (also known as a ‘gagging clause’ or ‘NDA’) under a settlement agreement preventing you from disclosing the existence of the agreement, the terms of the agreement, or the circumstances regarding the termination of your employment to a third party, save certain limited exceptions. These exceptions will normally include (but are not limited to):
- The solicitor instructed by you to provide you with settlement agreement advice
- Your spouse, partner, or civil partner
- Recruitment consultants or prospective employers to discuss your employment history
- Any medical, therapeutic or counselling adviser for the purposes of medical treatment
- If you’re required by law to disclose the terms
You should generally refrain from discussing the existence or terms of your settlement agreement with your workplace colleagues, as if your employer finds out you have done so it may have an adverse impact on the settlement agreement negotiations.
What are the usual payments you should expect to receive?
You should as a general rule expect to receive the following payments under a settlement agreement:
- Notice pay
- Holiday pay
- Any contractual sums owed to you (bonus, commission etc.)
- Statutory redundancy pay (if it is a redundancy situation and you qualify for such) (tip: you can calculate your statutory redundancy payment using the Government’s calculator)
- Compensation for termination of employment (also known as an ex gratia payment or severance payment)
What you are entitled to in your particular circumstances will depend on the facts of your case: it is generally advisable to discuss your situation with a legal adviser (such as a solicitor) in order to determine what your potential claims are and the potential value of your claims – most firms of solicitors are happy to have a no obligation free consultation with you to discuss your situation, so take advantage of that if you can to obtain some guidance on next steps.
Is what you are being offered fair?
The answer to this question is: it depends. What compensation payment is fair in any given case will depend upon the circumstances, including (but not limited to):
- How long you have been working for your employer
- What potential claims you have
- How long you have been out of employment for, if you have already left your job (whether you were dismissed or resigned)
- How serious any acts of discrimination or harassment are (if you are saying that you have been discriminated against or harassed)
Can you be fired if you refuse to sign a settlement agreement?
Normally, no: whether or not you sign a settlement agreement should normally not have any effect on whether you are dismissed from your job (and, in most circumstances, if you were fired because you refused to sign a settlement agreement then this would probably be an unfair dismissal). However, if you refuse to sign a settlement agreement and you are already within a disciplinary process, your employer might continue with the disciplinary process if you reject the settlement agreement (and this might result in your dismissal).
The terms of your settlement agreement will generally be shielded from any court of tribunal, if you are dismissed from your employment (as settlement agreements are generally discussed on a ‘without prejudice‘ and ‘protected conversation‘ basis).
Do you have to sign your settlement agreement?
No, you don’t have to sign your settlement agreement. I generally advise that you explore all options before rejecting a settlement agreement (such as, for example, negotiating the terms of the settlement agreement), but ultimately it’s up to you whether you wish to sign the agreement or not. Only you know what’s best for you.
What happens when you reach an agreement?
Once you’ve reached a deal with your employer the following will normally happen:
- Your employer will send you the terms of a draft settlement agreement for you to review
- You’ll need to get settlement agreement advice from a specialist employment solicitor
- Once you’re happy with the settlement agreement (and have received legal advice from your solicitor on the terms and effect of the agreement) you can sign it off
Once you’ve followed the steps above everything will generally be completed.
Why are you required to go to a solicitor for settlement agreement advice?
In order for a settlement agreement to be legally binding you must receive independent legal advice on the terms and effect of the settlement agreement from an independent legal adviser (such as a solicitor). We have explained what the requirements for a valid settlement agreement are in this article.
When will you be paid under the agreement?
This depends upon the terms of your settlement agreement.
If the settlement agreement sets out the payment date for the sums under the agreement then the sums should be paid to you by the dates specified in the settlement agreement.
If the settlement agreement does not set out the payment dates for any sums (or some sums) then such sums should be paid to you within a reasonable period of the date that you sign the settlement agreement (generally, in my experience, no later than the payroll processed after the termination date of your employment).
How can Redmans Solicitors help you?
Redmans can provide you with expert settlement agreement advice from our specialist employment solicitors. If you would like to discuss your settlement agreement with us please give us a call on 02033973603, email us, or request a call back.