Disagreements at work are sometimes unavoidable. Whether it’s a breakdown in communication, a performance issue, or a more serious allegation, these situations can quickly escalate. One way to bring matters to a close, without the stress of a tribunal, is through a settlement agreement.
Rachael Frankland, Senior Associate and Head of the Dispute Resolution Team at Bromleys, outlines how these agreements work and why they’re often the preferred route for resolving employment issues.
What Is a Settlement Agreement?
A Settlement Agreement is a legally binding document that sets out the terms under which an employee agrees to waive certain legal claims against their employer, usually in exchange for a financial settlement. It’s commonly used when both parties want to part ways on agreed terms and avoid further conflict.
These agreements are often used to resolve claims such as:
- Unfair dismissal
- Discrimination
- Breach of contract
Why Would You Use a Settlement Agreement?
There are several reasons why employers and employees choose this route:
- Discretion – Confidentiality clauses help protect reputations and keep sensitive matters private.
- Peace of mind – Both parties gain certainty and closure, avoiding the unpredictability of legal proceedings.
- Faster resolution – Negotiations can often be concluded in a matter of days or weeks.
- Lower costs – Avoiding a tribunal can significantly reduce legal fees and time off work.
How the Process Typically Works
Here’s a summary of how a Settlement Agreement usually comes together:
- Initial proposal – Either party can suggest a settlement, however formal advice should be obtained to determine how best to approach the situation tactically.
- Negotiation phase – Terms are discussed, including compensation, references, and any post-employment restrictions.
- Legal consultation – The employee must seek independent legal advice before signing.
- Final agreement – Once both parties are satisfied, the agreement is signed and becomes legally binding.
What’s Usually Included in a Settlement Agreement?
While every agreement is tailored to the situation, most will cover:
- End date of employment – Specifies the final working day of the employee with the company.
- Settlement payment – Details the financial compensation the employee will receive as part of the agreement.
- Waiver of legal claims – Confirms that the employee agrees not to pursue certain legal action against the employer in the future.
- Confidentiality obligations – Requires the parties to keep certain matters confidential
- Non-disparagement clauses – Prohibits the parties from making negative or harmful statements about the other.
Bromleys Can With Settlement Agreements
It is a legal requirement for employees to obtain independent legal advice upon the terms and effet of a Settlement Agreement. When used correctly, Settlement Agreements can offer a clean break and a fair outcome for both sides, when handled correctly.
At Bromleys, our employment law specialists can assist in drafting and reviewing Settlement Agreements, ensuring your rights are protected and your interests are prioritised.
Call us today on 0161 884 0905 or email bromleys@bromleys.co.uk and see how we can help.