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Settlement Agreements Solicitors

A settlement agreement – previously known as a compromise agreement – gives employers and employees the opportunity to resolve a dispute and make a clean break from an employment relationship.

The legally binding document contains terms and conditions which will ordinarily bring the contract of employment to an end. It is typically put in place to prevent a departing employee from taking legal action against a business, in exchange for a severance payment as well as other benefits.

If you are employee looking for legal guidance regarding a settlement agreement or compromise agreement (as previously known), please visit our employee section for more information on the help and support our solicitors can provide you with.

How we can help employers

The employment law department have substantial experience in drafting settlement agreements for many different types of businesses and situations.

Our settlement agreement solicitors will put together the document to your requirements, making sure that sufficient clauses are included to protect your business from harm. The team will also ensure that the correct procedure is followed, so that you can be safe in the knowledge that the settlement agreement is legally binding.

The department also provide legal guidance to employers during the negotiation of settlement agreements, which often arises after the agreement is presented to the employee and they take the necessary legal advice on its contents. During discussions between you and your employee, or their representative, we will work hard to reach an agreeable conclusion that is in the best interests of your business.

Benefits of settlement agreements

In the past, we have found that employers who draft a settlement agreement with the help of a solicitor benefit from greater peace of mind.

The document can help you to confidentially settle a potential or actual dispute that arises following the termination of a contract of employment, whether as a result of a dismissal, redundancy or other situation. It is also a good opportunity to refresh or update restrictions on future competition and to include clauses to prevent the use of confidential information. One of the main advantages is that the matter can also be resolved quickly without having to resort to the stress and cost of litigation.

 Negotiating Settlement Agreements

Settlement Agreements have long been used by employers in many different scenarios, but normally it is in connection with termination of employment on terms to be mutually agreed and sometimes to curtail a legal dispute that may otherwise follow.   This could be as a result of numerous reasons such as:

  • changes within the organisation;
  • perceived under performance;
  • repeated conduct concerns; or
  • an enhanced payment over and above contract provisions.

However, employers need to tread carefully before launching into such conversations with their employees in order to part ways. Employers should ensure there is a specific issue as otherwise an employee may perceive the conversation as a breach of their contract, as well as breach of the implied term of trust and confidence allowing an employee to claim constructive dismissal.

Employers could also find themselves facing claims of discrimination or victimisation if the situation is not handled carefully and with prior thought.

Furthermore employees may use a settlement offer which they have rejected as evidence that any further disciplinary or performance procedure is a sham.

It is therefore crucial to take legal advice before such discussions take place, so that what is already a difficult scenario does not turn into a much larger problem for an employer to try and resolve.

Since July 2013 there has also been an alternative vehicle for such discussions referred to as “Protected Conversations”.

These were introduced with a view to simplifying the initiation of such discussions with employees and to reduce the risk of the conversations being admissible.   However this has led to difficulties for employers who are not fully aware of the framework within which they can navigate such discussions and for them not to be admissible in subsequent tribunal proceedings.

“Protected Conversations” are only inadmissible in straightforward unfair dismissal cases and not where the dismissal is for one of the automatically unfair reasons or cases involving discrimination, unlawful detriment and breach of contract.   If any of these areas are an issue then as an employer you should be relying on “without prejudice” discussions rather than “Protected Conversations”.

We would therefore always advise employers to:-

  • Firstly consider whether it is appropriate to have the initial conversation and to consider the risks before proceeding?
  • If so, secondly is it appropriate to have a “without prejudice” discussion or a “Protected Conversation”?
  • Decide whether you are going to notify the employee prior to having the discussion or if the discussion is going to take place without prior notice. 
  • Prepare a script in advance so that there is sufficient information for the employee to understand the basis of why the conversation is taking place and the potential outcomes of not coming to an agreement on a settlement package. 
  • Give the employee time to consider the offer that you are making.  It is always helpful to put the offer in writing for them, ensuring that it is marked “without prejudice” or “Protected Conversation”.  Whilst you should give them a reasonable period to consider the offer, at the same time set a deadline to ensure it is not dragged out unnecessarily.
  • Once agreement is reached, it is crucial that an appropriate Settlement Agreement is drafted, which once entered into can be relied on.

The Employment team at Davis Blank Furniss can advise you on all the necessary steps and provide guidance for employers throughout negotiating Settlement Agreements as well as drafting Settlement Agreements that will be enforceable and protect your employers.

The Employment team can be contacted on 0161 832 3304.

Contact us for a consultation

If you would like to receive employment law advice and guidance from Davis Blank Furniss, please contact us on 08000 284 396 or use our online appointment and enquiry service for an initial consultation with a member of the team.