Settlement Agreements

Settlement Agreements are contracts between an Employer and Employee terminating the employment relationship usually based around some compensation to the Employee some of which can be paid tax free (subject to an indemnity in favour of the Employer – a sort of insurance policy that Employee will bear the responsibility for any further tax deemed payable by HMRC) and, perhaps, the provision of a reference. The Employee, in return, agrees to a number of conditions, the most important being that they will not issue proceedings (or pursue a grievance) against their Employer in relation to their employment or the termination of it, save for some very limited exceptions.

Settlement Agreements frequently impose other fairly onerous conditions upon the Employee including a requirement that the Agreement be kept confidential, the Employee does not make disparaging comments about their Employer and returns company property within a specified time frame. Occasionally Agreements include obligations to assist in internal or judicial investigations and the imposition of additional or extended restrictive covenants.

Importantly, the Agreement is not binding unless it has been reviewed and signed off by a suitably qualified person. T G Baynes, review such Agreements on a daily basis and can assist in the negotiation of terms to suit you. Settlement Agreements are standard documents and often the Employer does not draft them from scratch for each Employee. It often follows that there are clauses which are unworkable, which do not apply or which need amendment.   We will, when the Agreement has been concluded, manage the return of the Agreement and recovery of a signed copy from your Employer and provide you with a full written advice detailing the important aspects of your particular Agreement.

It is possible for a Settlement Agreement to be entered into at any time where the employment relationship is either coming to an end or has already come to an end, even where a dispute has been logged with ACAS or litigated before the Employment Tribunal, though, in those circumstances a COT3 Agreement is often used.

Settlement Agreement Fees

We are often asked what our fees are for reviewing the terms of a Settlement Agreement. We do our very best to keep within the budget set by your Employer as the contribution to legal costs they intend to make. This is also often a term of the Agreement. Occasionally, those costs do have to be exceeded where there are extended negotiations. We always ask the Employer to settle those additional costs but, if they will not, we always give you an estimate of any additional fees before carrying out further work.