How to use a settlement agreement to resolve an employment issue
Original author: Claire Birkinshaw
Updating author: Nicole Dawson, DAC Beachcroft LLP
Click on any of the hyperlinks to go to more detailed guidance below.
- Be aware that a settlement agreement is a legally binding agreement made between an employer and an employee under which the employee agrees not to pursue a particular claim that he or she has in relation to his or her employment or its termination.
- Take into account that there are a number of important legal formalities that must be complied with for a settlement agreement to be valid.
- Be aware of the issues involved in settling more than one complaint.
- Be aware that you can use a simple waiver and release form to settle contractual claims, but that a settlement agreement will be necessary for statutory claims.
- Understand the rules on the admissibility of details of pre-termination negotiations as evidence in employment tribunal claims.
- During negotiations ensure that the terms of the settlement agreement are expressed to be not binding until the agreement is signed by all parties.
- Use the settlement agreement to cover other important issues such as restrictive covenants and confidentiality obligations.
- Do not assume that all payments made under settlement agreements are tax-free.