If you’re leaving your employer because of a dispute, because they no longer require your services, or because you simply want to leave – there may be a settlement agreement proposed as part of your departure.
Settlement agreements offer the departing employee a sum of money in return for waiving their right to bring any legal claim against the employer. In such cases, it’s essential you seek advice from an experienced employment lawyer as early as possible, and ideally before any such ‘severance package’ is proposed.
Scrutinise any settlement agreement – preferably with professional legal help
Settlement agreements are often complex documents. They can seem financially attractive, but because they’re conditional on you giving up fundamental rights, they can actually undercompensate you in the longer term. For example, they might restrict your career path or business options after termination of your employment.
To terminate the contract of an employee of more than two years, an employer must comply with specific legal obligations. A fair dismissal can only take place for one of a small number of fair reasons, and must follow well established procedures.
Settlement agreements can speed up the employment termination process
Sometimes things go wrong in the workplace, and the termination of employment is accepted by employer and employee as the best option, without acrimony or litigation. A settlement agreement is a way to effect the termination swiftly, bypassing normally required procedures. Effectively, it waives the employee’s rights to follow certain grievance-related procedures, so if they’re in agreement it can be a preferable route.
Nonetheless, a settlement agreement is a lengthy document that covers many provisions. An employer will set out its offer within it, in exchange for you compromising all the potential claims you may have against it. The employer will also offer to pay for legal advice concerning the contents of the written agreement, while the lawyer who signs it will need to provide a certificate that he/she has advised you. Without that certificate, the agreement is not effective.
Full disclosure is crucial to success
As the employee with a settlement agreement offer, you need to disclose all the relevant circumstances to the lawyer advising you. We then ensure we understand those circumstances fully before giving advice on the claims you are compromising. We may well suggest your employer makes changes.
On signing the settlement agreement, you effectively give up all the claims set out in the agreement – and possibly claims that are generically referred to within it.
We draft settlement agreements routinely, and advise on settlement agreements every day, so we’re true experts at this and have an excellent track record of helping employees negotiate improved deals.