Settlement agreements
Our focus
We have been advising on settlement agreements (formerly or otherwise known as ‘compromise agreements’) since their inception in 1996 and have a wealth of experience. This allows us to provide a quick service from receiving initial contact from a client requiring advice to completing the settlement agreement and returning it to the Employer with our certificate of Independent Legal Advice.
Compromise agreements are the only means whereby an Employee can waive statutory claims such as unfair dismissal, discrimination or entitlements to a redundancy payment without the involvement of ACAS.
The Settlement agreement will only be valid where:
it is in writing and
the Employee has received independent legal advice from a relevant adviser who has professional indemnity insurance which Leeds Day carries.
An Employee cannot compromise potential future claims, though claims that have already arisen, unknown to the Employee, can be waived.
A settlement agreement will also contain a waiver of any claim for breach of contract as well as statutory claims. We will take you through all of the claims being waived and will provide written advice as to what the claims are for your to review as there will be claims that you may not have heard of.
We review each proposed settlement agreement and tailor it to fit your circumstances.
The advantage for the Employer is that they are able to draw a line under an Employee's departure or complaint and are protected from future claims. The advantage for the Employee is that the monies received in return are provided for by a legally binding and enforceable contract.
A well drafted Settlement agreement will also include an agreed form of reference.
Our expertise
We can provide you with advice, support and guidance on matters arising in relation to settlement agreements. Below are a selection of some typical ‘Q&As’:
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Your Employer wishes to bring your employment to an end with your consent and wants you to compromise certain employment rights claims that you may have against the Employer
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You may wish to do this if you:
Are unhappy with how your Employer treats you at work.
You have submitted a grievance, which either has not been dealt with or has led to an outcome that you are not happy with. This will lead you to feel unable to continue in your current employment.
If you are facing disciplinary action under the Employers disciplinary procedure or performance or a capability procedure has been instigated against you.
You may feel that you have grounds to bring a claim against your Employer in the employment tribunal but wish to come to an amicable resolution with your Employer.
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This is a written agreement between you and your Employer where you agree to bring your employment to an end, compromise all of your employment right claims and receive a financial settlement.
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A settlement agreement is a time and cost effective way of ending the employment relationship without the necessity of any form of legal proceedings. Once a settlement agreement has been entered into, you will not be able to bring an employment rights claim against your Employer in the Court or the employment tribunal and entering into a settlement agreement offers certainty to your Employer.
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This form of privileged discussion was introduced in 2013. It allows Employers to raise any issues they have with the Employee to facilitate determination of the employment relationship without going through the necessity of either a disciplinary or capability procedure. These procedures are generally time consuming, costly and stressful for both parties. Whatever is discussed in the protected conversation cannot be relied upon as evidence in any future unfair dismissal claim brought because the parties did not enter into a settlement agreement.
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It is our job to ensure that we review your particular personal circumstances which have led to an offer of a settlement agreement being made to you and review the strength of any claims that you have and advise upon an appropriate level of settlement which is fair to you and reflects the strength of your potential case. There is no winner as such . Both the Employer and Employee receive significant benefits from the settlement agreement.
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Once a settlement agreement has been offered to you, you are under no obligation to enter into it. It is only an offer made by the Employer for the terms that it considers are fair and reasonable. It may be the case that what is fair and reasonable is not what has been offered to you and we are of course ready, willing and able to evaluate what is the appropriate amount, advise you upon the same and make a counteroffer to your Employer. If we do not reach agreement, we will then advise you as to the next steps. Please see the facts of Mr B below.
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A settlement agreement is only effective between Employer and Employee if the Employee has received independent legal advice. That is what we will do for you and give the appropriate certificates of you having received independent legal advice to your Employer within the settlement agreement itself. The settlement agreement usually records that the Employer is making a contribution towards your costs. It may be that the contribution is insufficient and we shall seek to obtain an increased contribution from your Employer in the first instance.
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Amongst other matters the agreement will record:
Who the parties are
the salary paid
the untaken holiday
the monetary amount of the Payment in Lieu of Notice (PILON)
details of any ex gratia payment
the payment date for all payments
the date of the termination of employment
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Your employment contract will set out what you are entitled to on termination of the employment. Any payment above that may be an ex gratia payment. It will not include your notice, holiday, commission or bonus payments. An ex- gratia payment is highly tax efficient and may be offered after you have had a protected conversation with your Employer. Not all settlement agreements have an ex gratia payment and we will explore with your whether it is right that the Employer should make such payment.
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You may see this on the correspondence sent to you or between us and your Employer. The phrase “without prejudice” is intended to mean that any communications that follow cannot be admitted in a later tribunal or court case as evidence. It is entirely standard wording and is used to facilitate an open decision to help the parties reach a settlement.
“Subject to contract” means that the settlement agreement will not be binding unless and until there is an agreed signed contract on the final wording. This stops either party saying that there has been a prior binding agreement.
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If your Employer makes you an offer you will need to take into account:
how strong your case is.
whether you will be able to have any witnesses help you if they still work for the same Employer.
how far off the offer is from what you could get at Tribunal if everything went your way or only the best points.
if you want to get your job back or keep your job with an agreement that your Employer will make changes in your workplace if they are a large Employer who can redeploy you
what else you could do if you don’t accept the offer such and how long it will take to find another job.
will you be able to find another job during the notice period that the Employer is paying to you.
if the stress and time taken in making a tribunal claim is worth what is being offered to you now.
The above factors include making a legal assessment as to the strength of your case. We will carry this out for you and provide a short written report.
If you’ve been getting Universal Credit, Income Support or Jobseeker’s Allowance and settle your claim you won’t have to pay that back. If you win a tribunal claim, the DWP will claim back what they’ve paid you. You should also bear in mind that the DWP won’t claim that back if you settle a claim.
Examples of our previous work
We regularly act for Employees helping them achieve a dignified and fair exit route from their employment. Some examples of this are.
Mr B:
In 2020, we were instructed by Mr B who was paid £135,000 a year working in the construction industry and had been offered a settlement agreement offering to pay him circa £30,000 to bring his employment to an end.
We reviewed Mr B’s employment contract and noted that he was entitled to a bonus. Negotiations were then entered into concerning payment of this bonus. The Employer contended that the bonus was discretionary. Ultimately the settlement agreement was concluded with Mr B receiving £53,000, which included payment of all of his legal costs.
Mr M:
We were instructed by Mr M on 28 March 2022 at 12:33 and saw Mr M in person and completed the agreement at 13:43 hours on 1 April 2022. Mr M received an enhanced contribution towards his legal costs at our request due to the complexity of the dispute and £27,115.38 overall.
An online retailer:
We acted for 5 Employees who were made redundant due to their Employer going into administration. These were all completed in 6 working days and before the Employer went into administration. Each Employee received a different amount based on their length of service.
Long-term Director dismissal:
We were instructed by Mr Y who had been working for the same employer for over 20 years. The company was being sold but the new employer did not want Mr Y to remain as a Director. The first offer to pay him for his resignation as a Director was for £20,000. By the time the settlement agreement was concluded, this had increased to over £80,000. The settlement agreement was concluded within 5 working days of the employer informing Mr Y of the overall proposal.
Capability/unfair treatment:
We have acted for Mrs H who had been working for her employer for over a period of 7 years. An issue arose as to her alleged ability to carry out her work. With our assistance, a settlement agreement was signed within 7 days and the payment to her increasing by a month’s pay.
Redundancy:
We have acted for a former in-house lawyer for an IT company dealing with worldwide payment systems. The lawyer had agreed their own terms and we turned around the settlement agreement within 48 hours.
Whistleblower/Unfair dismissal
Margaret recently came to us for advice because the company she works for decided to make significant changes to their overseas working practices. She did not agree with the changes for ethical reasons and felt that she could no longer be a part of operations. She voiced her concerns and the company accepted that she had not been treated fairly.
In order to avoid Margaret from making a claim against the company, they offered her a ‘Settlement Agreement’ which we advised upon and completed within 48 hours.
“Thank you for your invaluable advice on this matter which was arranged at such short notice. This was very much appreciated indeed.”
Age is but a number:
We recently acted for an 85 year old gentleman who was offered a Settlement Agreement. When asked what he planned to do next he confirmed he would be getting another job! He was a pleasure to work with and we wish him all the best in his next endeavour
Please contact us on 0333 577 2250 or email employment@leedsday.co.uk