Commercial Law

“Workexit”-Settlement Agreements In An Uncertain Time

October 3, 2019

Employees involved in a dispute with an employer or under threat of being made redundant, may be involved in meetings during which they may be invited to an “off the record” session to discuss their departure on agreed terms. These are known as ‘protected conversations’.

The process will involve, invariably, the employer submitting a pre-prepared draft document known as a settlement agreement to the employee. The employee is then required to take advice on the terms and effect of the settlement agreement from an authorised advisor, often a solicitor, who has to be completely independent of the employer.

Once signed by both the employee and the employer, the settlement agreement will be binding upon both parties. They are as a result a convenient and relatively hassle free way of severing a link between employer and employee and genuine compensation payments can be paid tax free up to £30,000. They are a popular means of terminating contracts of employment in redundancy situations; where employees are involved in a disciplinary process; or where it is clear that neither the employee nor the employer want to continue the relationship but do not want to get involved in a protracted dispute that could end up in an Employment Tribunal. Settlement agreements can nip in the bud potential disputes, consigning them to history.

Popular as the settlement agreement route may be, they need to be drafted and scrutinised very carefully before either party signs up to the terms. In particular they need to accord with the minimum sums due for the number years of service, plus any warranties (or guarantees) to be given and restrictive covenants must be fully considered. In most cases, employers will usually provide a contribution to legal fees (another reason for their popularity) and these usually, but not always, cover the fees for the advice being given in advising the employee.

Given the current economic climate we are seeing a steady increase in the use of settlement agreements. Before potential changes to employment/tax legislation right now is the time to take advice from one of our expert employment lawyers here at Jarmans solicitors, otherwise the present significant advantages/opportunities of a settlement agreement could be lost for ever. This could be the time for “WorkExit’.

Please contact Barry Bond or Tom Browne on 01795 472291 or by email.

enquiries@jarmans-solicitors.co.uk