Settlement agreements allow employees and employers to amicably end their relationship. The point of the agreement is that, once signed, the employee forgoes any opportunity to bring any further claims in relation to employment disputes.
There are certain criteria that a settlement agreement should follow. Settlement agreements are:
- Legally binding and therefore, the employee no longer has a right to bring a claim in a Court or Tribunal;
- Must be in writing;
- will likely cover a payment and/or reference clause;
- Are entirely voluntary; and
- Can be offered at any stage of a relationship between employee and employer, or beyond.
Employers are usually the initiating party in any settlement agreement discussions as it forms a binding and contractual agreement that will terminate the relationship. There may be situations where a simple aspect of employment needs to be resolved and this can also be dealt with by a settlement agreement but would not necessarily terminate the relationship i.e. holiday pay entitlement.
Settlement agreements are dealt with on a without prejudice basis which means that if the conversations are unsuccessful, the fact an employer was willing to settle in that form is not disclosable in a Tribunal claim. If a settlement agreement is offered to an employee, they should be given a minimum of 10 calendar days to consider the contents as discussed in the ACAS Code of Practice.
You can find the ACAS Code of Practice here:
If a settlement agreement is proposed, it must include any and all terms and particulars agreed upon in writing (including those which are of a statutory right) and then it must be taken to an independent adviser to ensure all aspects are clear and understood by the employee. The advice is provided to the employee but normally paid for by the employer. Once this has taken place, the advisor must confirm they have provided the advice and the agreement itself must name the adviser specifically.