How Settlement Agreements Can Provide a Fresh Start in the New Year

December and January are often times when many of us turn our thoughts turn to fresh starts, resolutions and resolving issues which have troubled us during the year. This is especially the case when it comes to resolving long standing problems or grievances at work - during December and January, employment law solicitors see an increase in people who have been offered a settlement agreement by their employer.

Formerly known as compromise agreements, settlement agreements provide certainty between two parties and offer a clean (and hopefully amicable) break with an employer. Commonly used to resolve problems such as redundancy, performance issues, long-term sickness or a clash of personalities, settlement agreements are a legally binding arrangement between an employer and an employee which provide both parties with a release or waiver of future claims (for example the agreement to not pursue the case via an employment tribunal). Settlement agreements also set out an employee’s terms of departure and termination payment in return for waiving claims against the employer. If you’re offered a settlement agreement by your employer, you must obtain independent legal advice on the agreement and its effect on your statutory rights. Check that your legal advisor has insurance relating to the advice being given. He or she must also be named in the agreement. The agreement must be in writing and relate to a particular complaint or proceedings. An “adverse comment” clause may be included which prevents both parties from bad-mouthing the other to third parties (for example to other staff or potential employers). A settlement agreement can restrict an employee from discussing with others the reason for leaving and the terms on which they leave. However, it should allow the employee to disclose details to their family and prospective employers and can have an agreed job reference attached. If you’re not working your full notice and being paid “in lieu”, this should be stated in your agreement. It’s also worth noting that the first £30,000 of any compensation payment can usually be made free of tax and NI deductions, so the settlement agreement needs to reflect this. For information and advice, contact Jon Dyson at our Halifax office on 01422 339 600.