If there’s an issue at work that needs resolved, an employer may offer the employee a settlement agreement. These are legally binding agreements aimed at resolving a dispute or smoothly ending the employment relationship. Crucially, they are negotiated confidentially and result in the employee giving up their right to take a claim to the employment tribunal in return for financial compensation. When a settlement agreement is put on the table, it’s therefore important for employees to be informed so they can proceed in a way that’s in their best interests and means they get a good deal. Below our specialist employment law solicitors provide a brief overview of settlement agreements and some tips for employees thinking about entering into a settlement agreement.
Settlement agreements (sometimes called compromise agreements) are made between employers and employees in order to resolve an issue in the workplace. They can settle discrete issues, such as disputes over pay or workplace harassment, or in order to smoothly end the employment relationship.
Whatever the workplace issue or issues they are addressing, settlement agreements are meant to result in a mutually-acceptable outcome, usually with the employee agreeing not to take their employer to the employment tribunal in return for a financial payment. This means an employee must negotiate the terms of the agreement, allowing them the opportunity to get a deal that works for them. Below are three key tips for employees thinking about negotiating a settlement agreement. For more detailed legal advice and assistance, tailored to your unique circumstances, please contact us.
In most cases, the employer will propose a settlement agreement. While this may seem to put the employer in a stronger bargaining position, the process of coming to an agreement must be voluntary and fair, giving the employee sufficient opportunity to negotiate the terms. Amongst other things, this means that employers should allow employees to be accompanied at meetings by a colleague or other relevant companions. They should also provide the employee with all the information they need when considering whether or not to accept an offer, as well as providing the employee with:
It’s also important for employees to be aware that discussions concerning settlement agreements are confidential. This means that what is said during negotiations cannot influence any subsequent disciplinary procedure, but nor can it be used in legal proceedings if an agreement cannot be reached and a claim is made to the tribunal or court.
If the aim of the settlement agreement is to end the employment relationship, it is possible to ask your employer to provide a reference as part of the settlement. This involves agreeing both the form and wording of the reference, which must be a true and accurate summary of your employment. How comprehensive the reference will be will depend on the particular circumstances.
The most common feature of all settlement agreements, however, whether they relate to a discrete workplace issue or in order to end the employment relationship, is the financial payment made to an employee by the employer. This figure must be negotiated to ensure you don’t agree to a sum that’s below what you are potentially entitled to.
One of the most important elements of a settlement agreement for employees is the amount of compensation being offered. A favourable figure will not only reflect the fact that you are giving up your right to make a claim against your employer (and therefore the amount you could be entitled to if you have a potential claim and the costs involved in your employer dealing with a tribunal claim), it will also be tailored to your circumstances, such as taking into account elements such as:
The figure can also be negotiated in a way so as to minimise your tax exposure in respect of the figure offered.
Not only is it a legal requirement for an employee to get independent legal advice before entering into a settlement agreement, the agreement must also be negotiated so that it’s tailored to your precise situation and gets you the best possible deal. An experienced settlement agreement solicitor will make sure you’re fully informed and that the terms of your settlement agreement are fair and in your best interests. Importantly, most employees don’t have to shoulder the cost of getting legal advice. It’s common for the employer to cover the expenses involved. This is another element of the negotiation process that an expert employment lawyer will help you to agree with your employer.
For expert legal advice on any employment matter, tailored to your specific circumstances, please contact us. Dallas McMillan’s team of specialist employment law solicitors has vast experience helping employers and employees resolve issues in the workplace; from assistance with non-contentious issues, such as the drafting of compliant procedures and policies; to assistance with contentious matters, such as the resolution of disputes relating to unfair dismissal, redundancy and discrimination.
Our employment law team prides itself on not only providing a friendly and personal service to clients, but also high quality legal advice in this very specialised field. Based in Glasgow, Scotland, our employment lawyers can help you find the best possible solution. Please contact us for more information.
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