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Things Employees Should Know About Settlement Agreements

If you have been offered a settlement agreement, you might have some questions about what happens and how signing such an agreement will affect your working life. Whilst there is a lot of information online about settlement agreements, there are some specific questions we are often asked by clients. This post looks at some of the things our clients and all employees should know when it comes to negotiating or signing a settlement agreement.

Do I Need a Lawyer?

In short, yes. Whilst most contracts allow two parties to enter into the contract freely without the advice of a lawyer, settlement agreements are different, under a settlement agreement you may be waiving important legal rights, such as to bring a claim before an employment tribunal. As a result, it is a legal requirement that as an employee you receive proper independent legal advice before signing a settlement agreement. If you do not receive legal advice, the agreement will not be binding and may be challenged.

Why is my Employer Using a Settlement Agreement?

The reasons your employer might be offering a settlement agreement are varied. However, the most common reason for offering a settlement agreement is to protect themselves from employment tribunal action or to bring a dispute to an end. Settlement agreements are often used where there is the threat of a claim relating to unfair dismissal, discrimination in the workplace, holiday pay or entitlement, harassment and even breach of contract.

A settlement agreement allows employer and employee to resolve the dispute with both parties getting what they need to move on without too much difficulty.

There is also the situation where employers offer employees a settlement agreement as a matter of routine, but as long as you receive proper legal advice on your settlement agreement offer, a settlement agreement is often the best course of action for both you and your employer.

What is Included in a Settlement Agreement?

Every settlement agreement will contain different terms and conditions, but will typically include the following;

  • The claims the employee will waive as part of the agreement
  • The financial sum the employee is to receive
  • The employee's last date of employment (where relevant)
  • Confirmation that the employee has received proper legal advice concerning the agreement.

    There may also be other terms that you can negotiate as part of the agreement to give you security, or that your employer may insist upon as part of your exit package. These include;

  • Favourable reference
  • Confidentiality clauses
  • Restrictive covenants
  • Tax provisions
  • A non-disparagement clause.

    Your lawyer will explain each of the clauses in your settlement agreement to you and make sure you understand the consequences and obligations of each. Where we feel a clause is not favourable to you, we can negotiate with your employer on your behalf.

    What Does "Without Prejudice" Mean?

    Where a document or discussion is ‘without prejudice’ it normally means that the document or discussion cannot be used as evidence in a court or employment tribunal hearing. Settlement agreement discussions and drafts are often conducted without prejudice, but the rules are complex. Your lawyer will be able to discuss the meaning of without prejudice in the context of the facts of your case to give you a full understanding.

    Do I Need to Tell my Next Employer About the Agreement, and can I Discuss my Settlement Agreement Openly?

    Normally, confidentiality provisions may prevent you from disclosing your settlement agreement to your next employer, and as a result, you will normally not be asked to do so. You may even discuss with your current employer what will be said to your next employer as part of your settlement agreement discussions.

    Contact Macnairs + Wilson Employment Team in Glasgow and Paisley

    While Settlement Agreements are beneficial, there are a significant amount of issues and considerations, as outlined above, which could potentially arise from their use. As it is in neither party's interests to have a defective agreement, receiving the appropriate expert advice is therefore incredibly important.

    At Macnairs + Wilson, our experienced employment solicitors regularly act for both employees and employers in providing advice on Settlement Agreements and can guide you in a comprehensive and professional manner through the common issues likely to arise, as well as the potential effects on you and your business.

    Contact our employment law solicitors in Glasgow and Paisley for advice on Settlement Agreements or any other employment issues you may have. Contact us today.

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