Settlement agreements are legally binding contracts which can be used to end the employment relationship on agreed terms.
Their main feature is that they waive an individual’s right to make a claim to a court or employment tribunal on the matters that are specifically covered in the agreement. From the employer’s perspective you can be rest assured that the employee will not make a claim against them in the future, providing closure on the matter.
However, settlement agreement is not as simple as it sounds. It is important to get the right legal advice about your claim, before agreeing to the terms of a compromise agreement.
Our litigation solicitors have specialist expertise in settlement agreements. We are confident in this; you can rest assured that you will be getting expert advice about your settlement agreement from our litigation solicitors who are on your side.
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A Settlement Agreement is a legally binding contract made between an employee and employee. It is usually entered into at the termination of employment and sets out the full terms between the parties. The agreement can provide for termination payments (which may include your notice, a tax-free sum, redundancy, holiday, bonus, and other sums. There are, however, many other clauses (see below). In return for receiving these payments, your employee must agree not to bring any legal claims against you. The settlement agreement process is recognised by statute and is one of the few ways that an such agreement between an employer and employee can be totally binding in law. It is for this reason that you need to take independent legal advice on the document, usually by a solicitor, before it becomes binding. The solicitor also needs to certify the agreement.
Settlement Agreements offer certainty and a clean break between an employer and his employee. The employer has the guarantee that it will not have to deal with a future claim by that employee. An employee will have the security of a termination document setting out what financial settlement he or she is receiving together with other aspects of termination such as a job reference.
A “protected conversation” allows you and your employee to have confidential pre-termination settlement discussions without either of you being able to use the discussions against the other in any subsequent unfair dismissal proceedings. However, this protection only applies to ordinary unfair dismissal claims, not any other claims such as discrimination.
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