A settlement agreement is a contract made between an employer and employee. It usually sets out terms and conditions for ending the employee’s period of employment, but can also be used to change the terms and conditions in an employment contract.

The employee will generally waive their right to bring legal claims against their employer and in return will receive a lump sum payment. Settlement agreements are often used for TUPE, voluntary redundancies and to settle potential legal claims against employers.

The agreement will include restrictive covenants preventing you from acting in a certain way after you have left, for example, stopping you from divulging sensitive information or working for a competitor in the local area. 

It is a requirement that as an employee you take independent legal advice before signing a settlement agreement as it is a waiver of some of your rights. Your employer will generally pay towards the cost of this.

Settlement Agreements Solicitors

At Gibson Young Solicitors, we have a strong track record of obtaining good packages for clients when they leave their positions and we will work with you to identify what issues are important to you. We can advise you on the contents of the settlement agreement you have been offered and negotiate on your behalf to improve the terms where appropriate.

Our settlement agreement services include the following:

• Advising you on the terms and conditions of your settlement agreement or redundancy settlement agreement and whether they are fair

• Negotiating settlement agreements where you wish to improve on the offer made or where the restrictions imposed are too onerous

• Drafting settlement agreements for employers

If you would like to speak to one of our expert settlement agreement lawyers in SW15 or W4, ring us on 020 7924 2919, email us at reception@gibsonyoungsolicitors.com or fill out our Contact Form.

Our settlement agreement solicitors have a strong understanding of what should be included in a fair settlement agreement. We will give you our opinion of your offer and discuss your options with you.

We will also make sure that you know the implications of signing the contract and that you are satisfied that it is the right choice. 

A settlement agreement is a legally binding contract made between employer and employee, setting out agreed terms, often to end the employment. Key clauses include the following:

• Waiver of your legal rights to bring most types of claim, to include claims for unfair dismissal or breach of contract;

• How the notice period will be dealt with, for example, whether it will be worked or whether you will receive payment in lieu;

• The amount of compensation to be paid as well as details of other sums due, such as holiday pay, bonuses or commission;

• The amount that your employer will pay for your legal advice;

• A confidentiality clause requiring you to keep the terms of the employment settlement agreement confidential;

• A non-derogatory clause preventing you from saying anything derogatory about your employer;

• The wording of any reference that your employer will provide for you;

• A warranty made by you stating that you have not done anything for which your employer would be entitled to dismiss you;

• A tax indemnity clause agreeing that you will be liable for any outstanding tax.

A reasonable settlement agreement will adequately compensate you for any claims you were making against your employer and pay you for leaving without notice. We can advise you as to whether the sum you have been offered is typical and whether we believe that you could do better. We can negotiate with your employer on your behalf in respect of both the money offered and the terms and conditions, to ensure that you receive the best possible deal.

A settlement agreement is a legally binding contract and if either party breaches the terms of the agreement, the other party would be entitled to bring legal action against them to enforce the terms and/or to seek damages for breach of the contract.

It is open to you to refuse to sign a settlement agreement if you do not wish to. You may feel that you want to pursue a legal claim against your employer or you do not want to leave your job. It is worth speaking to a solicitor about your options in any event. It may be that your employer is entitled to dismiss you, in which case a settlement agreement might be advantageous. We can go through your situation with you and discuss what you are entitled to and how best to proceed.

A settlement agreement does not have to be witnessed, but some employers may prefer a witness to sign as well. In any event, you should not sign until you have taken independent legal advice and you are happy with all of the contents of the agreement.

A settlement agreement can be retracted at any time until it is signed, but once it has been signed it is a legally binding document and cannot be rescinded. It may be possible to ask the court to set aside an agreement where one party has misrepresented the situation, however this is unusual.

The first £30,000 of a lump sum payment is not usually taxed, provided it does not include contractual payments. Other payments, such as holiday pay or pay in lieu of notice will be taxed at the normal rate.

If you don’t sign a settlement agreement, you may be able to bring a claim against your employer if you believe that they have not treated you fairly. You should be aware however that if the offer you receive at court or a tribunal is lower than the amount offered in a settlement agreement, there is a risk you may have to pay your employer’s legal costs.

Turning down a settlement agreement does also leave you open to disciplinary action or dismissal, so you will need to consider your position carefully in deciding what action to take. 

You cannot unilaterally cancel a settlement agreement once you have signed it. If both you and your employer wished to end the agreement, you could both sign a new agreement to this effect. This would be unusual however, and you should generally assume that a settlement agreement will be binding and cannot be undone.

At Gibson Young Solicitors, we offer both legal expertise and outstanding client service. We are friendly and approachable and our advice is clear and straightforward. 

If you would like to speak to an expert settlement agreement lawyer in Putney or Chiswick, ring us on 020 7924 2919, email us at reception@gibsonyoungsolicitors.com or fill out our Contact Form. All initial enquiries are free of charge and without any obligation.