Settlement Agreements for Employers

Settlement Agreements can achieve this and regularly arise in redundancy situations.

Whatever the circumstances, the agreements can play a very important role and provide an acceptable compromise between the employer and employee which allows both parties to move on. The agreement will be a legally binding contract to end an employment relationship on agreed terms. They can be proposed by either the employer or an employee. There are important factors to bear in mind:

• The agreements can only be entered into voluntarily.
  
• Their terms must be in writing and the employee must be given the opportunity to obtain independent legal advice as to its terms and effects, preferably from a solicitor with specialist employment law experience. The independent adviser must have a current contract of insurance or professional indemnity covering the risk of a claim by the employee in respect of loss arising from the advice.
  
• The agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.
• The effect of the agreement will be to severely curtail the employee’s rights in an employment tribunal or court so independent legal advice is crucial to protect both parties.
• The initial terms of the agreement may be open to negotiation, usually revolving around the termination payment, the termination date or any post-termination restrictions.
• The agreement will often include an agreed reference for the employee.

The agreement only becomes binding once the employee, their advisor and the employer have signed it. At that point, the timetable set out within the agreement commences (for payment of notice pay/termination for loss of office etc).

At Thomas Flavell & Sons, we can assist you in the preparation of the agreement to best serve your business. We will advise you on the strategic and practical points to consider when managing exits from the business and explaining potential pitfalls and how to avoid them.