If you are an employer thinking about using a Settlement Agreement, or an employee that has been asked to sign one, we can help you.
What is a Settlement Agreement?
A Settlement Agreement (previously known as a Compromise Agreement) is a legally binding negotiated agreement that can be used to terminate the employer-employee relationship on agreed terms and is often used where there is an employment dispute between parties or if an employee is being offered a termination package.
A Settlement Agreement can be used at any stage of a dispute including after an Employment Tribunal claim has been raised.
As an employer you may wish to offer a Settlement Agreement to an employee to end the employment relationship and to resolve a dispute so as to avoid a future claim being raised in an Employment Tribunal (but you should take expert advice as to the best way to raise this option with the employee). You will require a tailored Settlement Agreement which is an agreement that is legally sound and cannot be challenged at a later date.
As an employee, if your employer offers you a Settlement Agreement you will want to ensure that it represents a good deal for you, or the best possible deal in the circumstances. You will want to ensure that your position is protected and that you understand what you will be giving up by signing the agreement. You will also want to understand what the alternatives are to agreeing to sign the Settlement Agreement.
In order for the Settlement Agreement to be valid it is a legal requirement that a solicitor reviews and explains the contents of the agreement to the employee before they sign. A certified and authorised member of a trade union can also advise.
What are the benefits of Settlement Agreements?
Benefits to Employers: The agreement often includes provision that the employee cannot bring any claim against the employer, such as a claim for unfair dismissal or discrimination or unpaid wages, to an Employment Tribunal at any later date. This allows a dispute to be resolved at an early stage and provides the employer with certainty that a line has been drawn under the employment relationship. The agreement will normally also contain confidentiality provisions which will ensure that any agreement reached will remain confidential.
Benefits to Employees: A Settlement Agreement can bring a conclusion in respect of some form of dispute. In return for entering into the agreement a settlement payment is often negotiated and potentially an agreed reference provided for. Your solicitor can help you explore potential claims beforehand and explain to you what claims you would be discharging.
Settlement Agreements allow both parties to avoid the uncertainties and expense that an Employment Tribunal claim could bring.
Do you need a solicitor to prepare a Settlement Agreement?
Employers should ensure that any Settlement Agreement they have drafted does not leave them vulnerable to future claims by an employee. We have extensive experience drafting such agreements and can ensure that any Settlement Agreement is ‘water-tight’.
It is also a legal requirement that the employee receives independent legal advice on the substance of the Settlement Agreement. Without this the agreement is not valid and the employer leaves themselves open to future claims by the employee.
If an agreement is not drafted correctly, although the employer has paid out compensation to the employee under their agreement the employee may still be able to bring a claim and keep the money already paid out to them. It is therefore advisable for an employer to use the services of a solicitor to draft the Settlement Agreement and ensure it is tailored to the particular needs of that employer and the particular circumstances of the case. “Off the shelf” agreements may not provide the necessary protection.
How much does it cost?
Employees: You are required to receive independent legal advice on the substance of the document. Your employer will in most cases offer to contribute to the costs of such advice up to a certain amount. If for example the employee wishes to negotiate terms such that additional costs would be incurred, over and above the employer’s contribution, these will be discussed with you beforehand and we would always ask the employer to increase their contribution towards legal fees. No additional work will be done without your consent.
Employers: We will discuss our fees and payment options with you at the outset. These could include hourly rates to allow you to “pay as you go”, or we can agree fee quotes for pieces of work. We also have the option of a retainer fee. Please contact us to discuss further.
Why use BTO for your Settlement Agreement?
We have extensive experience helping employees and employers draft, review and negotiate Settlement Agreements.
We deal with Settlement Agreements regularly for a wide range of employers and employees and can explain in simple terms the contents of the Settlement Agreement, helping cut through any legal jargon. We handle all cases ensuring client confidentiality and discretion at all times and we will provide objective advice with the best interests of our client in mind, which is never affected by an employer’s payment of our professional fees.
At BTO we understand that it can be unsettling for an employee to be presented with a Settlement Agreement by their employer and the length and detail of the document can be daunting. We can make you familiar with the key terms of the document and help you consider this important decision. If you wish us to do so we can negotiate the financial compensation on your behalf to ensure that you get the best deal possible.
Timescales for the signing of Settlement Agreements can often be tight and we can usually accommodate meetings to suit you, so that you can be quickly and professionally represented. We have offices in Glasgow and Edinburgh that are near to great transport links so it is easy to get to us.
Our close knit team of employment law experts have many years’ experience representing employees and employers in all kinds of employment law issues. Our professional team has employment law specialists accredited by the Law Society of Scotland and many years’ experience advising on Settlement Agreements for all types of circumstances.
We also understand that you require a responsive, personal service from a law firm that keeps in touch with you throughout the process and gets back to you promptly. You can rest assured that this is how we do business.
We cover all aspects of law including corporate, commercial, personal matters and litigation. For all your legal needs, we’ve got them covered. For more information please visit www.bto.co.uk
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