UK Employment Solicitors -

Settlement Agreement Solicitor - Employment Compromise Law

In the United Kingdom, a settlement (compromise) agreement is a contractual legislative agreement between an employer and an employee, wherein an employer wishes to terminate the employment relationship and agrees to pay the salary up to a certain date (partially or completely) and generally makes an ex gratia or voluntary payment that is normally tax free.

It is legally required by statute that employees in receipt of a draft settlement agreement from an employer receive a full and independent expert consultation regarding the details of the terms of the contract. An "independent consultation" means you are obliged by law to speak with a qualified legal adviser who is not connected in any way to your employer.

In most cases, the employer will pay the legal fees for the independent consultation and normally all settlement agreement solicitors charges appropriate to the execution of an agreement. Usually the legal fee payment arrangements are included as a term of the agreement.

The settlement agreement often offers an employee an amount of money over and above contractual obligations. This money is offered in return for the signing of the agreement. The wording in the agreement usually means that the employee is signing away any potential claim they may have against the employer, as a result of the employers actions or the dismissal. A settlement agreement is often a very important document. Once signed the employee would not normally be able to complain about any treatment he/she had received from the employer.

Details contained in the settlement agreement should address future actions of both parties including what can be said about the termination, future job references and statements by the employee about treatment while in employment. Settlement agreements often contain protective clauses relating to:

  • confidentiality about the reasons for the employment termination
  • confidentiality about product information
  • security for references for future job applications
  • company convertible stock shares
  • company savings and retirement plans
  • restrictive covenants (measures that prevent employees from being employed by a competitor, for a specific amount of time)

Specialist Legal Advice

Being presented with a settlement agreement to compromise any potential dispute by your employer can create an enormous amount of anxiety and uncertainty. It may feel as if your only option is to accept the existing terms of the agreement. In fact, these agreements can be very positive, provided the terms offered properly compensate you for loss of office and any potential claims. However, settlement agreements can sometimes contain terms that appear unfair or simply offer to honour the contract of employment and no more. If presented with a proposed agreement, you must see a settlement agreement solicitor who is independent of your employer immediately. It is important that you ensure that the solicitor specialises in employment law, as some of the issues arising in these agreements can be complex. It is very important that the circumstances behind any departure from the company or dismissal are explored and balanced against the amount of money being offered. If the amount of money does not properly compensate you, it would be necessary for your solicitor to negotiate terms with your employer. In some circumstances, you may be advised to refuse to sign the agreement and consider pursuing legal proceedings in the Employment Tribunal for unfair dismissal, discrimination or redundancy amongst many other remedies.

Agreement Terms

A settlement agreement is usually drafted by the employers specialist employment solicitors. Some deceitful or sneaky employers have the idea they can claim redundancy to terminate employment and pay less than they would in an unfair dismissal and to that end attempt to use a settlement agreement to preclude legal action in the future when the true facts of the employment termination come out. Signing the document, after receiving a consultation, implies that the employer and the employee will keep their promises contained in the agreement, thus indicating a full and final settlement. This is why it is imperative to give a solicitor every detail of the dismissal during the initial consultation, especially if you have suspicions that the redundancy claim is false or a sham.

Settlement agreements are filled with detailed information pertaining to the actions of both parties after termination, such as:

  • compensation amounts
  • what fellow employees will be told about the termination
  • references by the employer to future employers
  • mutual agreements meant to avoid derogatory remarks on either side
  • restrictions regarding future employment, trade secrets, luring fellow employees, as well as other agreed upon stipulations, some of which may have been a restrictive covenant clause in the original employment contract

In order to be valid the settlement agreement must follow certain protocols as follows:

  • document must be well prepared and detailed
  • the advisor must be identified and must counter-sign
  • the advisor must be covered by professional indemnity insurance
  • addresses particular complaints by the employee
  • must comply with requisite conditions
  • the employee must seek the advice of a professional and experienced independent advisor prior to signing the agreement

A valid settlement agreement can confer many benefits on both parties:

  • A terminated employee does not have to work for the period.
  • The compensation might be tax free; any ex gratia amount is not taxed.
  • Payment is usually made within 7-14 days of a signed agreement by way of a contractual term in the settlement agreement.
  • The amounts of compensation are guaranteed by the finalised agreement, whereas appearance before the Employment Tribunal carries no guarantee, except the minimums and maximum financial awards guaranteed by law.

Blanket Agreements

The courts have ruled that “blanket agreements”, wherein the employee waives all rights, are not binding, so the settlement agreement must be detailed with exact statements, such as:

  • Restriction of future employment.
  • References for future employment.
  • Any agreement about derogatory statements by either party.
  • Any agreement in the settlement of claims by either party.
  • Any agreement of assurances given by either party.
  • How much compensation will be paid and how much is free from tax.
  • Trade secrets or other confidential matters and the period of agreement.
  • What fellow employees will be told in regards to the termination.

In order for the settlement agreement to be considered a full and final arrangement, it must contain the following elements:

  • It must be submitted in writing.
  • It must address a specific complaint made by the employee.
  • It must establish the identity of the adviser.
  • The adviser must have valid indemnity insurance.
  • It must contain all requisite conditions.

Employment Termination

English law provides protection to an employee from unfair dismissal however an employer is allowed to terminate employment if it is carried out in a fair and reasonable manner. The termination of employment can be lawful if the employee cannot properly carry out their job or if the employee is guilty of serious misconduct or if they are unable to work for any reason. Termination may also be reasonable if it is by way of redundancy which may give entitlement to compensation for employees with more than two years service. If the redundancy is a sham then any dismissal is automatically unfair potentially leading to an unfair dismissal compensation claim. Just call our helpline, or complete the contact form or email our solicitors offices to find out if you have a potential claim in the Employment Tribunal.

Lawful Termination

In order for an unfair dismissal solicitor to establish that the termination of employment is fair an employer must be shown to have acted in a reasonable manner. An employer is required to fully investigate the situation leading up to the termination and to be able to fully justify the dismissal failing which the employee may have a valid claim for compensation. To justify termination an employer must show that it was for conduct, capability, redundancy, illegality or for some other substantial reason. An employer can legally terminate employment in the following circumstances :-

Unlawful Termination

Unfair dismissal may arise in any number of circumstances if termination of employment occurred due to any of the following reasons :-

Time Limits

Time limits apply and a claim must be filed in the Employment Tribunal within three months of the termination however the Employment Tribunal can, at their discretion, extend this period. Do not delay in taking legal advice from an unfair dismissal solicitor or the opportunity to claim compensation may be lost forever.

  • An employee must behave in a reasonable manner and if his conduct is unacceptable including theft, dishonesty, corruption, drug abuse, drunkenness, abusive behaviour, unjustified absences, regular lateness or unsuitable appearance then an employer may dismiss the employee without fear of retribution from the Employment Tribunal in Sheffield.

    If an employee is unable to do the job in a satisfactory manner then the employer is entitled to replace him with some who can do the job.

    Dismissal can be fair if it is by reason of redundancy however there are detailed procedures which must be followed by an employer if the termination is not to be deemed unfair dismissal. It is almost always worth an unfair dismissal solicitor considering the redundancy process as there are many hurdles where an employer can fall thereby giving an employee the opportunity to claim compensation always providing that the employee has been employed by that employer for at least two years.

    If continuation of employment causes a breach of the law then the employment can be terminated legally. This particularly applies in regards to work permits for employees from outside the EU.

    Dismissal can be fair for other substantial reasons and an Employment Tribunal is duty bound to consider any new situations that may arise that they have not dealt with before.

      If the employee suffered from discrimination which includes inappropriate or unfair treatment due to an employees race, sex, religious belief, disability or sexuality.

      Employees are entitled by law to be members of a Trade Union and to take part in union activities and employees are also entitled to refuse to belong to a union. If the employee is dismissed because they did, or did not join a union then the dismissal may be unfair.

      Employees are entitled to take leave including maternity leave, paternity leave, ante-natal leave, parental leave and dependants leave and any termination due to an employee actually taking their entitlement to recognised leave is unfair.

      It is not lawful to dismiss employees who take part in industrial action for less than eight weeks. There may be certain unusual circumstances where the period may be extended.

      Employees are entitled to refuse to work more than 48 hours and dismissal for refusing to work more than 48 hours is unlawful.


      Is the employee compelled to sign the settlement agreement? No, absolutely not, the employee in possession of the settlement agreement must seek independent legal advice prior to signing and if in the opinion of the either the employee or the legal adviser it is not a fair deal, it should not be signed and negotiations with the employer should begin, if those fail, your settlement agreement solicitor will most likely make application for hearing before the Employment Tribunal, at your request.

      Employment Law Solicitors

      Our settlement agreement solicitors are experts in employment law and regularly examine these documents. They are knowledgeable about the legal "jargon" used and can advise you whether or not you have been offered a good deal. They can negotiate with your employer if you received an unfair or unfavourable offer and if negotiations with your employer are not productive our solicitors can, at your request, make application to the Employment Tribunal to determine any disputed issues.

      An experienced employment solicitor will approach each situation with sensitivity and ensure that the client is fully informed of their potential claim and circumstances, prior to signing the settlement agreement. A good lawyer will not simply accept the terms originally offered by the employer and they will negotiate further payment where appropriate. The lawyer representing the employee must always be independent of the employer and will act in YOUR best interests even though the employer may be paying all of the legal costs. If the employee has not been properly compensated and it is not possible to negotiate a better deal with the employer then the employees solicitor will assist the client in pursuing matters before the Employment Tribunal. Settlement agreements are not just about the amount of compensation on offer. Factors such as confidentiality, references, share schemes and other savings plans, restrictive covenants (e.g. preventing employees from working for a competitor) are all highly relevant when employment ends. Our lawyers provide a service comprising of expertise, professionalism and practical, results-driven advice, working with you, to achieve your goals quickly and at a realistic cost.