A Settlement Agreement is a legally binding written agreement between an employer and an employee in which the employee gives up certain employment rights, usually (but not always) in return for an amount of money. The employee cannot then bring settled claims in the Employment Tribunal.
Employers may choose to offer a Settlement Agreement for a variety of reasons, but in all cases the employer will value the certainty of reaching an agreement that removes any prospect of ending up in the Employment Tribunal.
The law regards the employment relationship as fundamentally unequal and, therefore, has in place safeguards to protect workers (regarded by the law as being in the weaker position). Where an employer offers a settlement package to a worker, the written terms of the proposed agreement must be tailored to the individual circumstances and meet strict criteria set down in employment legislation. The employee must be advised by an independent advisor who is legally qualified or otherwise certified to give advice on a Settlement Agreement.
Used appropriately, Settlement Agreements can be a useful mechanism by which businesses may achieve commercial outomes.
If you are in Northampton or the surrounding area and would like to benefit from our employment law advice, contact us using the form on the right or call 01604 763494. You can also find a list of other employment law services we offer on our employment law page.
*Settlement Agreements were called Compromise Agreements before 29 July 2013.