A Settlement agreement (or compromise agreement as they were formally known) is a contract between you and your employer which is entered into immediately before or just after employment has been discontinued. They are often used to resolve disputes or to bring a clean end to a tricky employment situation. In exchange for a financial settlement made by the employer, the employee forfeits their right to take any further legal action against the employer.
Below is an example of a situation where a settlement agreement might be used.
Elizabeth had been working as an Account Manager for a large textile firm for the past three years. Nine months ago the firm was restructured and Elizabeth’s position was dis-established. She was offered another role in the Customer Services department, which she accepted. Unfortunately, after nine months it became clear that Elizabeth was not suited for her new role and both she and her employer were becoming increasingly unhappy with the situation. Elizabeth’s employer offered her a severance package containing an excellent reference and a lump sum payment and drew up a settlement agreement which was signed by both parties. Under the terms of the settlement agreement, Elizabeth is now prohibited from taking any further legal action against her former employer.
What Are The Advantages Of A Settlement Agreement?
Reaching a settlement agreement with your employer has several advantages including:
- A settlement agreement offers a ‘clean break’ between you and your employer.
- You can leave your position with a good reference and a financial settlement.
- The agreements are voluntary; you cannot be coerced into entering a settlement agreement.
- Settlement agreements are negotiable; you do not have to accept the first offer put on the table.
- You can stipulate that the terms of the agreement (including details of the financial settlement) remain confidential.
How We Can Advise You On a Proposed Settlement Agreement
Our employment lawyers can offer you sensible, down to earth advice on any proposed terms if you have been offered a settlement agreement. We can also help you to negotiate a better offer so you can make a clean break and move on to the next stage of your career.
If your employer has approached you about a settlement agreement you need proper legal advice to ensure you negotiate the best terms relevant to your interests. Contact our office today by filling in this form. Alternatively, you can phone us on 01444 235 232 to make an appointment to see one of our lawyers.