Settlement Agreements

Q1. Dear Jenny, there have been a round of redundancies at my place of work and I have been chosen. My boss has approached me and asked me to sign a Settlement Agreement, please can you tell me what this is because I don’t really understand what it will mean for me?

A1. Thank you for your question, we actually come across this situation very often. A Settlement Agreement used to be called a Compromise Agreement and is given authority under section 203 of the Employment Rights Act. It basically means that your employment will come to an end, by mutual agreement on an agreed date. It does not mean that you have been dismissed, nor resigned but a mutual agreement. You may have discussed this already with your employer, but if not, the agreement will state your termination date and what your final payment will be. In your case, this will be a redundancy payment, including your notice and accrued but unpaid holiday pay. It is possible that this might be enhanced. The agreement will also state when the payment will be made.  It is usual for there to be further clauses regarding confidentiality, derogatory comments and restrictive clauses. You may also be able to agree a reference to be annexed to the agreement. There will be a number of other clauses as prescribed by law.

The key reason why your employer will want to to sign the agreement is because, by doing so you will sign away your rights to bring an employment claim against them. These will be listed on the agreement. Often signing the agreement is in a leavers best interest, but sometimes it isn’t. It is crucial therefore, and a requirement in any event to ensure the agreement is valid, to take advice from an independent advisor. They must be a qualified lawyer, such as myself. We can discuss the offer and advise you properly as to how to more forward. You can also seek advice from a trade union representative or someone working at an advice centre, but they must be certified to give the advice so check this, otherwise the agreement won’t be valid.

Your employer should pay for you to receive the advice and we can turn this round in a day or two. If you would like to make an appointment then please contact me on j.nuttall@livingstons.co.uk or 01229 585555.