What is a settlement agreement?
A settlement agreement, also known as a settlement contract or compromise agreement, is a legally binding document that outlines the terms and conditions of an agreement between two parties to resolve a dispute, often, well before a dispute arises. Settlement Agreements are usually used when an employee leaves a job, or is asked to leave the role, and typically include details about financial compensation for the employee, actions each party must take, confidentiality clauses, and a release of any claims against one another.
Why are Settlement Agreements important?
An employment settlement agreement, often referred to as a "compromise agreement", is important for several reasons:
It provides legal protection to both the employer and the employee. It outlines the terms and conditions under which the employment relationship ends, reducing the risk of future disputes or legal actions. Once the Settlement Agreement is signed, you can move on, leaving your past employer a distant memory.
Settlement agreements often include confidentiality clauses, preventing either party from disclosing the terms of the agreement or the circumstances leading to the termination. This helps protect sensitive company information and an employee's reputation, but also means that the employer cannot divulge the terms of the Settlement Agreement, including details of any compensation paid to you.
It offers certainty to both parties. Employees know the compensation they will receive, and employers know they won't face future claims related to the termination.
Employees can, and when they instruct MG Legal’s team of solicitors, usually do receive compensation beyond what they may be entitled to under their employment contract or statutory entitlements, making it an attractive option for employees to accept the terms and move on.
It can help avoid costly and time-consuming litigation in employment tribunals, which can be in the best interest of both the employer and the employee.
It provides a clear and legally binding resolution to the employment relationship, allowing both parties to move on without lingering disputes.
In the UK, to be legally binding, settlement agreements must meet certain legal requirements, including independent legal advice for the employee. Failure to comply with these requirements can render the agreement invalid.
Employment settlement agreements are essential in the UK to protect the interests of both employers and employees when terminating an employment relationship and to provide a clear, legally binding resolution.
How we can assist with your Settlement Agreement?
When it comes to settlement agreements we can assist you by:
• Reviewing and advising on the terms of the Settlement Agreement
• Accrued but unpaid holiday days
• Advising on non-compete clauses
• Advising on restrictive covenants
• Advising on garden leave
• Advising if your settlement offer is fair
• Providing advisors certificates
Negotiation Tips for a Settlement Agreement
Understand Your Worth
Know Your Rights: Familiarise yourself with your employment rights and the specific circumstances of your case.
Assess Your Position: Consider factors like length of service, your role, and any grievances, or disputes that may influence the negotiation.
Leverage the ACAS Code of Practice
Guided Negotiations: The ACAS Code offers a framework for fair and effective negotiations.
Good Faith Engagement: Ensure both parties engage in the process with honesty and openness.
Evaluate the Offer
Review Terms Carefully: Analyse the initial offer, focusing on severance pay, references, and any restrictions like non-compete clauses.
Seek Legal Advice: Consulting a legal expert can provide clarity and strengthen your negotiating position.
Articulate Your Needs: Clearly state your expectations and be prepared to justify them.
Stay Professional: Maintain a professional demeanour throughout the process.
Aim for a Win-Win Outcome
Mutual Benefits: Negotiations should aim for an agreement that benefits both parties.
Flexibility: Be open to compromise where necessary to reach a satisfactory conclusion.
Navigating a settlement agreement requires a blend of legal knowledge, negotiation skills, and strategic thinking. By applying these tips and adhering to the ACAS Code of Practice, you can enhance your chances of securing a favourable deal. Remember, seeking professional legal advice can be invaluable in this process.
Settlement Agreement FAQs
The short answer to this, is yes. While you're not legally required to have a solicitor review a settlement agreement in the UK, a solicitor can ensure that the agreement is fair and in your best interest, as well as provide legal advice on its terms. Also, as all Settlement Agreements specify that you must take independent legal advice on the terms found there, without advice from a solicitor, the settlement agreement isn’t valid. The law regulates settlement agreements and requires that you have independent advice on the terms and their effect, and the effect on your ability to pursue claims in the employment tribunal.
This is the tricky part. Not because our solicitors aren’t experts when it comes to Settlement Agreements, but because of the delicate nature of the work we do- client confidentiality is paramount here. What we can say is this: time after time, when employees come to MG Legal with a Settlement Agreement in their hand, we make sure they receive more than their contractual, or statutory entitlement. The best part of this is that we can usually have your Settlement Agreement done and dusted, within a business day, and your employer pays our bill.
To a degree, yes. Once the Settlement Agreement is received, it's common for both parties to discuss and potentially modify the terms, or at least some of, to reach a mutually acceptable agreement. Often, the terms are employee-biased, meaning the terms of the Settlement Agreement could be better that what you are owed contractually, or statutorily. However, you always need a solicitor that deals with Settlement Agreements to advise you what rights you are signing away- employers often have one or more pages in the Settlement Agreement dedicated to all the rights you are signing away, once you sign the Settlement Agreement.
Not usually. In fact, our solicitors have always ensured the employer, and not the employee, pays for the advice we give. Once we agree a fee with your employer, we will work within that budget and ensure that it covers your legal fees.
Employers often offer settlement agreements on a goodwill basis, even to employees with less than two years of service. These agreements can also serve as an alternative to redundancy, providing a mutually beneficial resolution for both parties.
The duration can vary depending on the complexity of the case and the negotiation process. However, it's essential for employees to have enough time to seek legal advice, which MG Legal readily provides through our accessible services across Lancashire, and via Skype and Zoom calls.
Interestingly, a significant percentage of employees choose to leave their employer after they are offered a settlement agreement. This decision is often influenced by factors like workplace disputes, redundancy, or a mutual agreement to part ways. In some cases, where employees are not necessarily entitled to redundancy or other exit settlements, the employers may still offer such an agreement.
How to contact MG Legal’s Settlement Agreement solicitors
Our offices are based across Lancashire. From Garstang, in Preston, to Longridge, Lancaster and Lytham, on the Fylde Coast, our solicitors are available to help you with your Settlement Agreement. We cover all PR, and FY postcodes, and can work remotely, offering services throughout England and Wales, if you do not live locally, but still want the best advice on Settlement Agreements.
Get in touch today
If you have been given a Settlement Agreement, and told to get independent legal advice, or have been told that a Settlement Agreement is on its way to you, do not hesitate to get in touch with MG Legal. If you do have a copy already, our solicitors will ask you to email a copy of your Settlement Agreement, so that when we speak on the 'phone, was are already aware of the terms offered to you, and able to advise you of the next steps to take. When you are happy with the Terms offered, our solicitors can give your employed a declaration that you have received independent legal advice. If you are in Preston, Lancaster, Lytham, or Garstang, feel free to come and see us. If you live anywhere else in England and Wales, email us at firstname.lastname@example.org. For an immediate response, please contact us by completing this form, below.