Personal Law

Settlement Agreements

August 7, 2019

Settlement agreements are used by employers and employees to bring an end to the contractual relationship on terms agreed by both parties.  Any agreement not resolved through a Conciliation Officer at ACAS will need to be concluded by a settlement agreement (and it should be noted that special rules about termination payments apply to employees in the public sector).

The benefits of reaching and recording terms in a settlement agreement include the prevention of the parties  bringing or continuing a claim in a Tribunal or a Court.  

The main point of a settlement agreement is often to bring a tidy end to a contractual dispute or, just as often, redundancy.  If the form of the settlement agreement meets the prescribed  statutory conditions, then the parties can contract out of the statutory rights. A Tribunal also has the power to determine whether a payment made under an agreement meets the statutory requirements.

Needless to say, there is a long list of complaints capable of settlement.  However, it is not possible for an employee to contract out of a right to the statutory minimum notice, equal treatment if an agency worker, statutory paternity, maternity and adoption pay, pension rights and any personal injury claims that have not yet arisen.  

It goes without saying that settlement agreements should be made to measure, but they can also include future claims not then known to an employee, but the terms of the agreement must be clear and straightforward when identifying a potential claim.  Generally, three types of claim cannot be prevented, including the right to enforce pension rights, certain personal injury claims and of course the agreement itself.

A settlement agreement will include provision for advice to be given (by a “relevant independent advisor”).  The advice should, in each case, relate to the ability of the employee to pursue a claim or claims in the Tribunal in the future.  

Settlement agreements can of course be enforced before a Tribunal as a contract claim, or separately in a claim before the Courts.  Settlement agreements here can include COT3 agreements as well.  This enforceability applies to settlement agreements entered into before the termination of the contract.  If entered into after termination, any claim would have to be brought in the civil Courts.

For more information, or for further advice, get in touch with our experienced employment solicitors today on 01795 472291