With many people’s jobs at risk due to the Covid-19 pandemic, we explain below what a settlement agreement is and why it is important for you to get expert legal advice before signing.

What is a settlement agreement? 

A settlement agreement is a legally binding agreement between an employer and an employee that brings the employment relationship to an end.

The agreement will usually involve the employer offering a payment to the employee (subject to a statutory minimum). In return, the employee agrees to waive any current or future employment-related claims against their employer.

Content of a settlement agreement 

The contents of a settlement agreement can vary by employer. Most employers will use a standard form, amending certain provisions on a case-by-case basis.

A settlement agreement should contain provisions such as:

  • Amount of the payment, including how and when the payment will be made;
  • The claims to be waived – with a warranty that the employee does not know of any claims they may currently have against the employer;
  • The claims which are not waived;
  • Termination dates;
  • Arrangements for the return of company property;
  • Confidentiality clauses; and
  • Confirmation that the employee has received legal advice on the contents of the settlement agreement.

Claims that may be waived 

By signing a settlement agreement an employee waives their legal rights to bring claims that they may have against their employer.

Such claims may include any breaches of contract, unfair dismissal claims, discrimination claims, holiday pay and wrongful dismissal.

Claims that cannot be waived 

Although the majority of claims are waived by the employee under the settlement agreement, there are certain claims which cannot be waived. These are claims such as personal injury claims, pension rights and certain statutory rights. Even once the settlement agreement is signed, the employee can still bring those claims against their (former) employer.

How can we help?

If you are an employee seeking legal advice on the terms of your settlement agreement, we can arrange an appointment to advise you.

If you are an employer seeking a panel firm to refer your employees to, please contact us to see if we can assist. You can call us on 020 3440 8000 or email A_Settlementagreementadvice@tvedwards.com with your enquiry.

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