Settlement Agreement – Legal Advice
You may have been called into a meeting at work and offered a settlement agreement by your employer.
Sometimes a settlement agreement can come out of the blue, in which case your first reaction might be shock. Losing your job, especially when it is unexpected, can leave you feeling confused, anxious and frustrated. There could be a number of reasons why your employer has suggested a settlement agreement.
They may wish to avoid having to go through the time and expense of following formal procedures, such as consultations and selections in redundancy situations.
The settlement agreement may be offered as an alternative to formal disciplinary proceedings (e.g. where there is a performance or conduct issue about which there is disagreement).
To avoid employment tribunal proceedings, e.g. where there has been a procedural defect by the employer in not following their disciplinary policy.
Alternatively, it may be that you have been off sick for a while and cannot or do not wish to return to work. Perhaps you have been unhappy in your job for some time, due to, for example, overwork, excessive targets, bullying or a change of management.
However, it could be that you and your employer have mutually agreed to part ways, because the job hasn’t worked out due to circumstances having changed since you started in the post.
You may have many questions, especially if you have never been in this situation before. What is a settlement agreement? Why has my employer told me I must take independent legal advice? Why is it important? Is the compensation enough? Can I get more? Should I sign the settlement agreement? What happens if I don’t?
We understand that you will be feeling uncertain about your options and we will take the time to address your concerns.
Whatever the situation you find yourself in, it is important to choose the right lawyer. Settlement agreements are often complex, lengthy and heavy with legal jargon, usually because they have been drafted by the employer’s solicitors with the primary purpose of protecting their client. It is always advisable therefore to choose a legal expert who has a lot of experience in reviewing many thousands of settlement agreements to ensure that nothing in the small print is overlooked and that your interests are fully protected.
Incorrect advice or advice from an inexperienced advisor can be very costly as once the settlement agreement is signed by each party and your legal advisor it will be very difficult, if not impossible, to have it set aside.
Straightforward, practical advice on settlement agreements. No legal jargon.
Timely advice. Your employer will usually set a deadline for the settlement agreement to be finalised. If the deadline is not met your employer may withdraw the offer. We can therefore offer you an early appointment to ensure that deadlines are not missed.
The convenience of email, telephone or personal consultations. Your choice.
Costs guarantee. Whilst your employer will insert a clause into the settlement agreement that they will make a contribution towards your legal fees you will want to be sure when choosing a legal representative that you do not fall into the trap of receiving an unexpected legal bill yourself. We guarantee that this will never happen if you choose us. In the unlikely event that the contribution from your employer will not cover our fees, we will (with your permission) contact your employer to seek an increase. If you do not wish us to do this or your employer refuses, then any additional fees will only be incurred by agreement with you in advance. We will only ever advise this course of action if the benefits to you outweigh the additional costs, so you will never end up out of pocket by following our advice.
Boring (but important) bits – Compensation for Loss of Employment
The advantage of a settlement agreement is that it provides for a clean break between the parties. You agree not to pursue any claims in the Employment Tribunal or County Court against your employer in exchange for a lump sum (often referred to in the settlement agreement as a ‘termination payment.’)
The first £30,000.00 can be paid free of tax and without deductions for national insurance contributions. Redundancy payments are included in the tax-free lump sum.
You should also be paid all salary and other benefits due, such as accrued holiday pay and payment in lieu of notice pay (PILON) to the termination date (although these benefits are contractual as opposed to compensatory and are therefore taxable).
Employment References and Announcements
It can be useful, if you are going to be looking for another job, to agree a Reference with your employer in advance. This should be incorporated into the settlement agreement as, otherwise, your employer is not legally obliged to provide one.
In certain circumstances it may be appropriate to agree with your employer the wording of a formal announcement so that your colleagues can be informed about your departure in terms that you are happy with. This then needs to be attached as a schedule to the settlement agreement in the same way as an agreed Reference, to give it legal effect.
Settlement Agreements Compromise Agreements – Cheshire
Our head office is based in Warrington but we are easily accessible from Liverpool, Manchester, Chester, Wigan, Newton-le-Willows, St. Helens, Widnes and Runcorn (8 of the M62) should you wish to visit our offices.
There is free parking on-site and disabled access.
We have clients throughout the UK so don’t let the fact that you might live at the other end of the country put you off. If you would like to instruct us, we are happy to advise over the telephone at a time convenient to you.
Contact us now by email at [email protected], or by telephone on 01925 937070. Alternatively, complete our Contact Us Form and we will call you.
If you have been made redundant or have another employment law problem you can visit the Employment Law section of our website to find out more Employment Law at DSM Legal Solicitors.
Some examples of what can go wrong if you don’t take the right advice
Signing away all your rights.
In one case an employee inadvertently signed away his rights to pursue his ongoing personal injury claim worth thousands of pounds.
Taking the employer at their word.
An employee who signed a settlement agreement on the strength of what was promised by her employer was shocked when the employer refused to honour his promise. Unfortunately for the employee the employer was well within his rights to do this as the settlement agreement contained a clause which stated that the settlement agreement constituted the entire agreement between the parties and superseded any other agreement, whether written or oral.
Signing the settlement agreement on the assumption that that the employer won’t mind if the employee has found another job.
In some settlement agreements there will be a clause stating that the employee warrants that by signing the settlement agreement they have not been offered or accepted another job or any form of consultancy etc at the time of signing the settlement agreement which would provide them with any form of income. The employer in this case was within his rights to demand repayment of the termination payment upon discovering that the employee had signed an untrue statement due to the fact that he had already accepted another job when he signed the settlement agreement. It is likely that the employee was not aware of the clause as it is one that is often overlooked.
A settlement agreement is a very effective way of enabling both parties to have a clean break and move on by creating certainty.
However, it is important that you fully understand the consequences of signing the agreement as once signed you will be taken to have read, understood and agreed to its terms.