If you are being are redundant and have been offered an enhanced exit package which is to be formalised by a redundancy settlement agreement this Q&A will be of interest.
If you need settlement agreement advice talk to JPP Law. Our experienced settlement agreement solicitors provide remote legal advice over the phone or video call. It’s easy to book via our online system (same day appointments often available) and it’s a fast turnaround on the paperwork. For more information visit: Settlement Agreement Advice
What is a redundancy settlement agreement?
A settlement agreement is a legal contract between you and your employer, that details the outcome of a matter between both parties. The terms of the agreement must be adhered to by both parties and normally the employer requires that the terms remain confidential.
What’s the difference between redundancy and a settlement agreement?
Redundancy follows a fair process that usually ends in a statutory redundancy payment for employees with 2+ years of service. Often, the employee has the right to appeal against the redundancy and may be able to make a claim for unfair dismissal against their former employer.
A settlement agreement sets out the terms for both the employee and employer to end the working relationship. Assuming the settlement agreement terms are agreed, are fair and have been reviewed by an independent solicitor, once signed the employee is unable to take their employer to court or a tribunal to ask for more money in the future.
You may also be interested in Employment Settlement Agreements for Disputes
What should the settlement agreement contain?
A settlement agreement is normally a promise to pay the employee a severance payment in return for not pursuing any claims in a tribunal or court case against their employer. In addition to the core legal requirements to be in writing and following receipt of independent advice for the employee, the details will likely include notice pay, holiday pay, bonuses, shares, legal costs, compensation payment and a work reference.
Do I need a solicitor for a settlement agreement?
Yes. Without legal advice from a solicitor before agreeing to the settlement, it is invalid. The employee must understand all terms and their implications before committing to a settlement agreement for it to be legally valid.
Is a settlement agreement required in a redundancy situation?
No, it is not required, but often a settlement agreement is used in a redundancy situation as it can enable the employee to secure better redundancy terms rather than taking statutory redundancy payment.
When is a settlement agreement used in a redundancy situation?
A settlement agreement is often used in a redundancy situation to avoid going through a formal redundancy process, as it enables both parties to establish mutually agreed terms.
How can a settlement agreement be beneficial in a redundancy situation?
A settlement agreement can be beneficial in a redundancy situation as it speeds up the redundancy process as there is no need to complete the statutory redundancy process and for a disgruntled employee who believes they are being unfairly dismissed a settlement agreement avoids the need for a potentially lengthy and expensive tribunal. The settlement agreement ensures a clean break with the employer and generally leads to an enhanced redundancy payment for the employee.
Is the employee’s agreement necessary for a settlement agreement to be valid?
Yes, settlement agreements are voluntary and need the employee’s agreement to be valid.
What factors contribute to the validity of a settlement agreement?
For a settlement agreement to be valid, certain legal requirements must be met. These include the employee must agree to the terms after seeking independent legal advice; the contract must be in writing; the agreement must reference a particular issue or proceeding; and the inclusion of a statement that all legal conditions have been met.
Who is responsible for covering the costs of legal advice related to a settlement agreement?
It is the employee’s responsibility to pay for legal advice related to their settlement agreement. However, it’s usual practice for the employer to contribute to the legal costs for advice or to pay in full.
Are settlement agreement negotiations confidential?
Settlement agreement negotiations are confidential if both parties agree that they are. To make negotiations confidential, the “without prejudice” rule applies to ensure all conversations and discussions, spoken or in writing, cannot be used in a tribunal or court case by the employee or employer should no agreement be made.
Are all pre-termination discussions considered inadmissible in an unfair dismissal case?
Almost all pre-termination discussions are excluded from being used in an unfair dismissal case by both parties. The rule of “protected conversation” means the content of the pre-termination discussions cannot be used against the other party in any future unfair dismissal case.
However, this protection for both parties only applies to straightforward unfair dismissal claims and not to other claims like discrimination. Furthermore, an employer can lose their right to protection for inappropriate behaviour during the discussions, such as pressuring their employee to sign the settlement agreement before they’re ready to.
How much time should an employee be given to consider an offer?
An employee should be given a reasonable amount of time to consider an offer – which will vary depending on the particulars of each case. As a guide, Acas recommends that an employee is given a minimum of 10 calendar days to consider the proposed terms of the settlement and to seek legal advice.
Can an employer retract a settlement agreement?
An employer can retract a settlement agreement at any stage of the negotiations, before the contract is signed by the employee and employer. Once signed, the agreement is legally binding, and the employer would be unable to withdraw it.
What are the consequences of refusing to sign a settlement agreement?
If the employer has a grievance with the employee, refusing to sign a settlement agreement could lead to the employer taking disciplinary action against the employee. Alternatively, if the employee has a grievance with the employer, the employer may wish to seek advice on how to make a claim against the employer. Either way, the matter can end up in the employment tribunal.
It might also result in the employer refusing to contribute to the employee’s legal fees if the settlement agreement has reached the stage of independent legal advice.
If you need settlement agreement advice talk to JPP Law. Our experienced settlement agreement solicitors provide remote legal advice over the phone or video call. It’s easy to book via our online system (same day appointments often available) and it’s a fast turnaround on the paperwork. For more information visit: Settlement Agreement Advice
