Formerly known as a Compromise Agreement, a Settlement Agreement is a legally binding contract made between an employee and employer which provides the terms upon which the employee’s employment will terminate.
A severance payment to the employee, sometimes referred to as an ex-gratia payment, is usually included by the employer with the principal objective of obtaining the employee’s agreement not to pursue claims against the employer. There are often clauses included, relating to matters such as confidentiality, return of company property and employee warranties which are relied upon by the employer.
An employer might choose to present a Settlement Agreement for one of many reasons, examples include:
- In a redundancy situation
- Where an employee has brought, or has threatened to bring a claim against the employer
- To dismiss an employee without risk of being sued for unfair dismissal in the Employment Tribunal in order to achieve a ‘clean break’
There are numerous legislative provisions which must be satisfied for a Settlement Agreement to be binding.
An employee is required to receive legal advice from an independent adviser on the terms and effect of the proposed agreement. At PGM Solicitors we provide employees with the requisite advice and are able to offer timely appointments either in person or remotely.
If you are issued with a Settlement Agreement, please do not hesitate to contact our specialist team on 01792 468684 or email enquiries@pgmsolicitors.co.uk.
