Are you looking for independent legal advice on a settlement agreement? Our team with help. We have extensive experience of advising on and negotiating settlement agreements for employees and employers clients both locally to our four offices in Salisbury, Fordingbridge, Andover and Amesbury, as well as throughout England and Wales.
What is a Settlement Agreement?
Our employment law solicitors understand that employers often want to dismiss employees without following procedures or without having a fair reason for dismissal.
The solution is often a UK Settlement Agreement [or Compromise Agreement as it was known before July 2013] under which the employer pays the employee a sum of money and the employee effectively signs away rights to any claims they may have against the employer.
The essence of any settlement agreement is compromise, finding some common ground and working out a solution that meets both parties’ needs. In particular, the employee is allowed to leave with dignity and a clear employment record, and the employer knows exactly how much they have to pay out as a financial settlement.
However, don’t forget that entering into a settlement agreement is always voluntary.
What employment matters can be dealt using a compromise agreement?
UK compromise agreements can be used to settle a wide variety of employment issues include redundancy payments, compensation for unfair dismissal claims, severance packages for dismissal, bonuses, unpaid wages, pay in lieu of notice, and holiday pay entitlement.
There are also other employment related issues that may be resolved using these agreements including those not related to termination of employment.
Are Settlement Agreements binding?
Yes, they are legally binding contracts, setting out the exact conditions for a termination of employment. They are usually negotiated between both parties’ employment solicitors, and will take account of such things as statutory requirements, any conduct issues at work, and the terms of the existing employment contract.
They are legally enforceable, which means that neither party can go back on the agreement without risking penalties. For example, if the agreement states that all parties should keep details of the agreement confidential, then the employee could forfeit their financial settlement if they breach that confidentiality. If the breach is on the employer’s side, then they may find that the employee is entitled to make an employment tribunal compensation claim after al
It is essential that any employee understands the effect of a Settlement Agreement and in order for a Settlement Agreement to be valid it is necessary for the employee to get advice from an independent employment law solicitor.
Can a settlement agreement ever be overturned?
Yes, but only in exceptional cases – for example if the employee is intentionally misled into accepting an agreement with conditions that the employer knew were false. This may make the current Agreement invalid and mean that the employee can make further claims outside the agreement.
Do I have to agree to the settlement agreement ?
No, as an employee you are not required to sign the Agreement if you are not satisfied with its terms – the offer can be rejected and the draft agreement returned to the employer for further negotiation. Our solicitors can help you with that negotiation, to make sure you get the best deal available. We don’t just automatically rubber stamp any draft settlement agreement received from your employer.
However bear in mind that your employer’s initial offer may well include more favourable terms than required by law – and if you don’t accept the proposed agreement, and try to negotiate hard yourself, they could decide to withdraw the offer. That’s why you need a solicitor with plenty of experience of negotiating settlement agreements.
How can help you
When dealing with your settlement agreements, our solicitors will:
- Get hold of the draft settlement agreement from your employer
- Explain your options – and advise on you are entitled to and whether the settlement offer made by your employer is reasonable – or whether it can be improved upon
- Negotiate the terms of the agreement [if you are unhappy with the initial offer]
- Finalise the settlement agreement, agree any amendments and arrange to have it signed and completed
Our Settlement Agreement Solicitors are experienced negotiators and will ensure you get a fair settlement. We will also advise you on your options, which if you are unhappy with the terms following any attempt at negotiation might include making an Employment Tribunal claim against your employer.
Our employment law solicitors also help employers with the drafting of such Agreements to ensure that they are valid and comply with the appropriate legislation.
How much will a Settlement Agreement cost?
When acting for employees, in most cases:
- There is usually no cost to you for our legal advice on your Settlement Agreement. Your employer will usually pay your legal costs. Our solicitors can confirm whether or not you will have to pay any costs as soon as they see the draft Settlement Agreement and after an initial FREE consultation with you on the phone or in person
- Our solicitors can advise you very quickly
- We can advise you by phone or email if you prefer
What will my settlement agreement contain?
Although each and every agreement is usually different, here are some of the most common clauses contained in many of them:
- Your termination date: i.e. the date when your employment ends. Your employment can finish at the end of the required notice period, or the date can be agreed as part of the settlement agreement.
- How much compensation you’re going to receive. You can usually take a maximum of £30,000 tax free. However if your compensation package includes wages and holiday pay or PILON (payment in lieu of notice), then you expect to have income tax and national insurance contributions deducted] . This clause may also cover any agreement relating to the benefit or pensions due to the employee.
- Payment of your legal costs. It’s usual for employers to either pay, or at least make a significant contributions towards your solicitor’s costs, because the settlement agreement won’t be valid without you having taken independent legal advice
- A confidentiality clause. It’s common for the agreement to include terms restricting both parties ability to reveal what’s in the settlement agreement – and if appropriate, it may also try to limit your ability to reveal trade secrets or confidential business information
- Gagging clauses – Some agreements contain restrictions on either party from making any critical comments about the other
- References – Some settlement agreements also include an agreement by the employer to provide an employment reference – if this applies to your case, and it’s always a good idea to get the actual reference included as a schedule to the agreement itself
- Restrictive covenant – some employers may try to put some sort of restriction on your future employment. While this may be appropriate for some senior positions, this is exactly the kind of reason why you need a specialist solicitor to look at your settlement agreement
- Waiver of claims: This clause usually provides that the employee gives up the right to make certain listed claims against the employer [NB the rights to some claims such as maternity or paternity pay can’t be given up in a settlement agreement]
- Employee warranty. It’s not usual for the employee to give certain assurances such as agreeing to return the employer’s confidential information or other property
- Entire agreement clause. This technical clause can sometimes be quite important – it means that neither party can try to rely on anything said or written in negotiations or contained in any other document. An entire agreement clause is fairly self-explanatory – it means that the settlement agreement is the whole of the agreement with nothing else included.
5 simple reasons why a settlement agreement will benefit you
- Your chance to get a quick, hassle free settlement without tribunal action
- Having the right to continue pursuing a claim if the employer for any reason breaches the terms of your agreement
- Having access to legal advice from a specialist solicitor to negotiate get you She best possible deal under the agreement
- still being able to pursue some claims after the agreement has been signed – such as a potential personal injury claim that you were not aware of when signing, or issues relating to accrued pensions
- Having independent legal advice, which is compulsory, usually paid for in part of full by your employer before signing the agreement
If I have signed a Compromise Agreement, can I still claim against my former employer?
In three specific areas, you are free to claim against your former employer, despite signing a compromise agreement. These are:
- Breach of contract – if your former employer has failed to meet his obligations under the terms of the agreement, eg failure to pay your agreed compensation.
- Personal injury claims – these are usually still valid, however, any pre-existing injuries you may be suffering, and are aware of at the time of signing, cannot be included in a claim.
- Pension funds – you may still able to make a claim in relation to any accumulated pension contributions during your time working for your employer.
Do I need to pay tax on any compensation that I receive?
Payment of up to £30,000 under an employment compromise agreement can be made tax free. However, tax can apply on payment above this figure, and in other areas. If your agreement includes a PILON (payment in lieu of notice) clause, then your payment will be considered as part of your salary under contract, so will be liable to tax.
If your compensation is structured to include wages to a certain date, and, for example, holiday pay, then you will also be liable for tax and national insurance payments. However, if your agreement contains no PILON clause, then your payment will be seen as a compensatory lump sum, and will be tax free.
Furthermore, your employer will more than likely seek a ‘tax indemnity’ clause for the agreement; this means that any tax payments demanded of your employer in relation to the agreement will be your responsibility to settle.
What about my employee benefits?
It is really important that your employment law Solicitor checks the suggested terms of your agreement to make sure that any bonuses and commission you are entitled to area are to be paid in full. These amounts should also be clearly stated in your Settlement Agreement.
Any pension contributions should continue during your notice period unless your contract says otherwise. If an arrangement is reached with your employer for a lump sum to be paid into your pension as part of the Agreement, you may be entitled to a tax-free payment. Your Solicitor will be able to advise you regarding any pension losses, especially if you have a final salary pension.
It is also important to determine your position regarding pension benefits which can be done prior to leaving your employment
Are the contents of my settlement agreement confidential?
The confidentiality clause is an extremely part of the Settlement Agreement for most employers and it can also be used to protect the employee. For example, a clause that stops you from saying critical things about your employer can be extended to to stop your employer bad mouthing you as well. This kind of clause protecting the employee can be particularly useful when it comes to references.
In addition to a confidentiality clause, it can sometimes be extremely useful to include a provision in which your employer agrees to provide a job reference for the employee – and not to make any other comments or statements varying from that agreed reference.
Without this kind of clause, there’s nothing to stop your employer giving you an appalling reference – which can really undermine your future career prospects. On that basis, it’s always a good idea to consider putting an agreed reference clause in your settlement agreement – and to make sure that the reference itself is agreed before the settlement agreement itself is actually signed.
What is gardening leave?
Gardening leave is the right an employer may have to stop an employee actually coming into the office to work while remaining in paid employment. Why might an employer prefer a worker to remain off work whilst being paid? Common reasons include fears that employees might prove disruptive or undermine morale, might use the opportunity to acquire sensitive business information or attempt to lure clients or customers with them to their new job. An employer will not generally have the right to enforce gardening leave unless there is a provision in the existing contract of employment allowing for it. However the rights to enforce gardening leave is often negotiated as one of the terms of employment compromise agreements.
Contact our Settlement Agreement Solicitors today
Our Employment Law Solicitors provide legal advice to employees who are offered a Compromise Agreement and will assess whether the amount offered within the agreement is enough in the circumstances. We don’t even need to see you to advise you. We act for Employers and Employees throughout Wiltshire, Hampshire, Dorset and throughout England and Wales from our offices in Salisbury, Fordingbridge, Amesbury and Andover.
For specialist legal advice from our expert Settlement Agreement Solicitors, contact us today.