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Employment Settlement Agreements

A Settlement Agreement is a legally binding contract made between an employer and employee, either towards the end or just after employment has terminated. They can also be used to resolve an ongoing workplace dispute, for example, a dispute over redundancy pay.


Settlement Agreements under the Employment Rights Act are useful documents for both employers and employees as they make it possible for employment disputes to come to an end peacefully. There is usually something in the agreement for everyone.


Typically, when employment comes to and end, the employee will receive a sum of money to tide them over while they find a new job (notice money, holiday pay and perhaps a tax free ex gratia payment) and a reference. Meanwhile the employer will, through the settlement agreement, ensure that it does not have to face any claims from the employee and that the employee will behave properly after the employment is at an end regarding company clients and other company property.


How can we help you?

We’ll ensure that you fully understand the rights you’re compromising and whether the compensation payment proposed will be sufficient for such a compromise. If the compensation is insufficient we’ll negotiate directly with the employer to achieve the best result for you.

We can also advise on share sales and options to purchase as well as the tax implications of the contractual and compensatory payments.

You can be sure that we’ll make you fully aware of the ongoing obligations after execution of the agreement, for example restrictions on future employment and confidentiality.

Our Employment solicitors can also assist you in high-value court claims for breach of contract and in defending allegations relating to confidentiality or breach of restrictive covenants.

Should you wish to discuss your individual or business situation, please contact Caroline Batko at cab@wdavies.com


What will the ESA document look like?

Agreements vary from the very simple to the fairly complex.

Essentially the agreements deal with:

  • Identity
  • What rights are being compromised (and which are not)
  • Payments to be made and tax on them
  • The return or retention of company property
  • Obligations after employment ends
  • Notices to staff
  • References


What should I find and bring with me to a consultation?

If possible, bring:

  • The settlement agreement draft itself (and an electronic copy if possible)
  • The contract of employment and or handbook (perhaps containing policies)
  • Any pension or benefit documentation

Having these documents saves time and sometimes advice (especially about obligations after employment ends) cannot be given without them.


What does Without Prejudice mean?

It means that as long as the people having the discussion are genuinely discussing compromising their legal rights, those discussions can take place in secrecy from the Judge and ‘off the record’.

This is important because if the settlement negotiations are not successful, the employer and employee will wish to pursue their rights in an Employment Tribunal. They will not wish the without prejudice discussions, perhaps containing offers to compromise those rights, or admissions which might damage them in Tribunal, to be read out before the Tribunal or Court has given judgment. The system enables the employer and employee to make offers to settle. Courts can see the without prejudice discussions after they have decided the case and adverse costs consequences may follow if reasonable offers to settle have been refused.

There are procedures available for where an employer or an employee abuses protected conversations or without prejudice privilege. Privilege and protected conversations can be complex subjects and lawyers on both sides try and keep both sides safe by making sure protection is in place.

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