Don’t Settle For Less

A Settlement Agreement, formally known as a compromise agreement, is an agreement made between an employee and employer which is legally binding and usually ends the employment relationship. They usually involve an employee agreeing to leave their position with a financial settlement in exchange for waiving their rights to bring an unfair dismissal claim against their former employer.

What are the legal requirements of a settlement agreement?

The conditions regulating settlement agreements are that:

  • the agreement must be in writing
  • it must relate to the particular proceedings
  • you and your employer must have received advice from a ‘relevant independent adviser’ as to the terms and effect of the proposed agreement and, in particular, as to its effect on his ability to pursue his rights before a tribunal
  • the employer must have relevant insurance covering the risk of a claim by the employee or worker in respect of loss arising as a result of the independent advice provided
  • the agreement must identify the legal adviser
  • the agreement must state that the conditions regulating settlement agreements under the relevant statutory provisions (which should be identified) have been satisfied, otherwise it will be void

Who can provide independent advice?

A person is a 'relevant independent adviser' if they are:

  • not employed by the employer, and
  • a qualified lawyer (i.e., a barrister, solicitor or other authorised advocate or litigator), or
  • an officer, official, employee or member of an independent trade union who has been certified in writing by the union as competent to give advice and as authorised to do so on behalf of the union, or
  • someone who works at an advice centre and has been certified in writing by the centre as competent to give advice and as authorised to do so on behalf of the centre, or
  • a Fellow of the Institute of Legal Executives practising in a solicitor's practice

What is the ‘without prejudice’ rule?

The English legal system is designed to encourage early settlement, outside of the courtroom.  Court proceedings are not only expensive for clients, but society as a whole, as it is expensive to try a case.

Therefore, it is a well-known principle of English law that communications between parties to a litigious dispute, for the purpose of settling it, are not generally admissible in evidence before the court as they are protected from disclosure by what is known as “without prejudice” privilege.

Settlement agreements are usually headed up “Without Prejudice”.  This means that the employer and employee can discuss proposals freely in negotiations without worrying that what they say may be used in evidence against them.

What happens if a settlement agreement is breached?

If an employer or employee believes that the other party is in breach of the settlement agreement, they can bring a claim in the civil courts or the Employment Tribunal. However, they can only bring a claim in the Employment Tribunal if the settlement agreement was entered into before the end of employment.

To find out more about settlement agreements, please search for an expert employment solicitor on Solicitors Guru today.


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