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Settlement Agreements

settlement agreementSettlement Agreements are used where an employee is agreeing to leave their employment in return for compensation, perhaps in a redundancy situation, following a grievance, or where there are allegations of misconduct or poor performance. 

The employer will agree to pay compensation for loss of employment – sometimes termed as severance pay or a termination payment. In return, the employee agrees not to bring any legal claims against the employer.

To be legally effective, an employee must receive independent legal advice either from a Trade Union representative or qualified Solicitor.

If you require advice or assistance with a Settlement Agreement book an initial consultation with one of our experienced Employment Law Solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

How much does it cost to get advice on a Settlement Agreement?

Our fees for advising you on the terms and effect of a Settlement Agreement range from £500 – £750+VAT. Your employer should agree to meet that cost, in which case we would send them an invoice directly.

Advice on the strengths and weaknesses of any claims you are compromising, or negotiating the key terms of a Settlement Agreement, will incur additional costs depending on your particular circumstances. We can provide you with an estimate of costs according to your needs.

What is a Protected Conversation?

A Protected Conversation is a conversation between you and your employer to explore whether you can agree to leave your employment on mutually agreeable terms. These conversations cannot be discussed before an Employment Tribunal hearing a claim for unfair dismissal, except in cases of automatic unfair dismissal.

If there is improper behaviour by your employer, an Employment Tribunal can decide that you could in fact refer to that conversation. To be protected therefore, your employer should not be placing any inappropriate pressure on you to accept their proposed terms, such as imposing an unrealistic timeframe.

What does “Without Prejudice, Subject to Contract” mean?

“Without Prejudice” is a legal principle that prevents statements made in a genuine attempt to resolve a dispute being discussed before an Employment Tribunal or court. It may be that Settlement Agreement negotiations are Without Prejudice if they are attempting to resolve an existing dispute.

“Subject to Contract” is usually used to make clear that an agreement for an employee to leave in return for compensation is not final until both the employee and employer have agreed the full terms of the Settlement Agreement.

How long should I be given to decide whether or not to accept a Settlement Agreement?

The ACAS Code of Practice on Settlement Agreements expressly confirms that employees should be given a minimum of 10 calendar days to consider the proposed formal written terms of a Settlement Agreement and receive independent legal advice. 

Do I have to sign a Non Disclosure Agreement?

Most Settlement Agreements contain confidentiality clauses, commonly known as NDAs (Non Disclosure Agreements). We can advise whether NDA clauses are appropriate and suggest alternative wording if not.

Many Settlement Agreements also contain restrictions on you making derogatory or detrimental comments about your employer after you leave. Again, we can advise whether these clauses are appropriate, and suggest alternative wording if not.

What are common terms in a Settlement Agreement?

Settlement Agreements usually contain a number of promises, known as warranties, as well as the restriction on you bringing any claims against your employer. Common promises are:

  • To abide by restrictions in your Contract of Employment on confidentiality, poaching clients or colleagues or acting in competition with your employer after you have left
  • You have not done anything or failed to do anything that would justify dismissal without notice
  • At the date of signing the Settlement Agreement, you have not received or accepted an offer of alternative employment
  • To return company property and delete copies of documents on your personal devices
  • To hand over passwords to company software
  • To continue to assist with litigation or investigations after your employment has ended, if needed
  • To keep the existence and terms of the Settlement Agreement, and sometimes also the circumstances leading to the termination of your employment, confidential
  • Not to make derogatory or detrimental statements about your employer
  • You are not aware of any claims not listed in the Settlement Agreement
  • You are not aware of any claims for personal injury or relating to your pension

Is my Settlement Agreement payment tax free?

Some, but not all, payments can be made tax free provided that they are compensating you for loss of employment, up to a limit of £30,000. Payments made to cover notice pay, accrued holiday or pay owed to you are subject to tax and national insurance in the usual way.

We will examine your Settlement Agreement to check it correctly identifies payments as tax free or taxable, and that no other clauses in the Settlement Agreement place genuinely tax free payments at risk of scrutiny from HMRC.

How we can help with Settlement Agreements

At Elite Law Solicitors, our experienced Employment Law Solicitors can provide specialist legal advice and assistance on the terms and effect of a Settlement Agreement. We can also advise on the strengths and weaknesses of any claims you are compromising, or negotiate the key terms of a Settlement Agreement.

If you require advice or assistance with a Settlement Agreement book an initial consultation with one of our experienced Employment Law Solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

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