Settlement Agreement Advice for Employees

Settlements are often negotiable. You can discuss changes to the financial terms or other provisions through your solicitors who can advise on strategy and negotiate on your behalf.

If either party breaches the agreement, the other may be entitled to take legal action. This could include seeking payment owed or enforcing confidentiality provisions.

Factors such as your length of service, salary, potential claims, and the strength of your position should all be taken into consideration. Legal advice can help you understand what may be reasonable to request and whether the offer reflects your circumstances.

Once signed by both parties, the agreement takes effect. Your employment will usually end on the agreed date, and payments should be made in line with the terms set out in the agreement.

It is usual for the employee to sign the agreement first after receiving legal advice and for the solicitor to provide their adviser’s certificate. The settlement agreement usually only becomes binding once both you and your employer have signed it with the accompanying adviser’s certificate.

A settlement agreement usually signed by an employee and their employer (a person with authority to sign on behalf of the business). The employee must receive independent legal advice from a qualified adviser, such as a solicitor before it becomes legally valid and it is often requested that the solicitor provides a signed certificate to confirm the advice has been given.

Most settlement agreements include confidentiality clauses, which restrict what you and your employer can say about the agreement and, in some cases, the circumstances surrounding it. However, nothing will prevent you from speaking to your lawyer about the terms.

You are usually given a reasonable amount of time to consider the agreement, often at least 10 days. You should not feel pressured to sign without taking proper advice.

Some payments under a settlement agreement may be tax-free, but others such as wages or notice pay are subject to tax.

For a settlement agreement to be binding, it needs to contain certain clauses including that advice has been taken from a solicitor, they are covered by insurance or indemnity, identify the adviser and state the statutory conditions are satisfied. From an employee’s perspective, a settlement agreement should clearly set out the compensation being paid and the tax treatment of those payments, including any ongoing benefits you may receive, which claims are being waived, the agreed notice or termination arrangements including the return of company property and any dates that payments are due. It will also usually include confidentiality provisions, restrictive covenants (if applicable), non- disclosure clauses, a general prohibition on negative comments about the Company and, where agreed details of any references.

Once properly signed, a settlement agreement is a legally binding document. For it to be valid, you must receive independent legal advice from a qualified adviser, such as a solicitor, before signing.

Whether you should sign the agreement depends on your individual circumstances, how much is being offered and whether you have a claim to bring against your employer. A settlement agreement can provide financial security and certainty, but it may also involve giving up important legal rights. It’s essential to fully understand the terms before deciding.