A settlement agreement is given to departing employees to prevent them bringing certain claims in the Employment Tribunal or in the County Court.
It does not necessarily mean that an employer has treated an employee badly. In many circumstances settlement agreements simply give an employer peace of mind that a potentially costly claim will not happen.
In a settlement agreement employees agree by contract not to bring certain claims against their employer. These most commonly include claims in unfair dismissal, constructive dismissal (where the employee has resigned), discrimination, or for unpaid wages. In consideration for this, the employer makes a payment to the employee. The settlement agreement also sets out any other sums the employer will pay the employee, such as notice pay and unpaid wages or expenses.
For a settlement agreement to be valid, a qualified legal adviser must give advice to the employee on its terms and effects and then countersign the agreement or an accompanying letter. Usually the employer will agree to pay the legal adviser’s fees for this advice on completion of the settlement agreement.
If you need advice on a settlement agreement or any related employment matter, then contact a member of the employment team.