Frequently Asked Questions

“FAQ’s – All of your Questions answered below –

An employment settlement agreement is a legally-binding written contract normally between an employer and employee that brings an employment relationship to an end in a mutually agreed way. It settles or compromises the employee’s right to pursue certain identified legal claims which the employee has or might have against their employer. In return, the employee usually receives a benefit in the form of a Termination Payment. That can be made up of contractual and non-contractual sums as well as other non-monetary benefits eg. a reference. 

There are a variety of reasons why you might be offered a settlement agreement. These include:-

1. Your employer being concerned about the strength and values of potential employment tribunal claims that you might have against them;

2. Your employer could routinely offer settlement agreements to departing employees to bring certainty in the conclusion of the employment relationship; and/or

3. Your employer’s legal advisers might advise them to offer a settlement agreement for another reason (for example to reinforce contractual terms like restrictive covenants, underline existing or impose fresh obligations of confidentiality, ensure your assistance with a matter after termination of employment)

You generally have three options if you have been offered a settlement agreement:

  • Accept,
  • Negotiate or
  • Reject


1. Accepting the settlement agreement

There are different stages of acceptance – for example, you can accept the notion of your employer offering you a settlement agreement or you can accept the principle terms on offer (eg. compensation, leave date). These can be inferred as ‘acceptances in principle’ and while non-binding, can be awkward to retract later. It is generally advisable prior to accepting terms of a settlement agreement in principle to seek legal advice first. That way you keep the path clearer to negotiation.  There are almost always clauses in settlement agreements that need changing.

2. Negotiating the settlement agreement

In our experience, it is usually advisable to try and negotiate the terms of your settlement agreement before accepting anything even in principle. The most common types of clauses to negotiate are (among others): the compensation payment; other financial terms such as notice pay, holiday pay, bonus, commission; contractual terms that continue post-employment eg. restrictive covenants; reference. It is a case of ‘if you don’t ask, you don’t get’ and there will be no further chance.

3.  Rejecting the settlement agreement

In our experience it is generally not a good idea to reject the offer of a settlement agreement without even trying to negotiate the terms first – unless you make a counter-offer you won’t know whether what you want to negotiate is achievable. Almost always try and negotiate the terms first.

For an Employment Settlement Agreement to be valid, it needs to:-

  • be in writing;
  • relate to a particular complaint or proceedings;
  • identify the relevant independent adviser who gives the employee legal advice upon its terms and confirm they are insured;
  • state that these provisions have been satisfied.

The Agreement will have an adviser’s certificate attached to it for us to sign. Because the employee must receive independent legal advice about it, the employer will normally pay the entirety of, or at least make a substantial contribution towards, your legal costs. This contribution will vary according to the complexity of the Agreement and your circumstances. The particular legal conditions of it are set out in Section 147(3) Equality Act 2010.

A Settlement Agreement, once signed by all parties, is a legally binding contract where the employee agrees to the termination of their employment as well as agreeing to waive virtually all claims they have, or may have, against their employer. In return, the vast majority of cases will see the employee receive a termination payment. That can be made of various elements such as an ex gratia payment, payment in lieu of notice, holiday pay.

For many employees this situation will be a first. They will have no knowledge or experience of the factors that are relevant in such situations. They may be understandably concerned by their employer’s motives and may feel targeted in an unfair scenario. That is why experienced and practical help, advice and support is necessary. We understand that and will take the time to go through the background with you and set out your options.

Our role in advising you is to ensure you fully understand the Agreement’s terms and implications, as well as the options you have.

Agree, for the law is costly” - German proverb

Recent Acas research showed that around three quarters of employment cases settled without the need to go to an Employment Tribunal hearing.

Settlement agreements have advantages for both employees and employers. Employment relationships generally do not last forever. A settlement agreement can bring something that – for whatever reasons – is not working, to a swift and reasonable end, on agreed terms, that then allows both parties to move on.

For the employer, it will secure the termination of someone’s employment whilst protecting the employer against future claims.

For the employee – as well as the financial incentive usually on offer, you can obtain other benefits which you cannot achieve via an Employment Tribunal claim. For example, an agreed reference.  

Settlement Agreements give certainty, discretion and speed allowing both parties to part amicably without escalation and cost. They entirely avoid the downsides of taking a Tribunal claim. They are far less likely to ‘burn bridges’.

A key point of settlement agreements is to bring closure. To achieve finality, the agreement needs to be legally binding on both parties. The law requires the employee to have received  independent legal advice from a qualified lawyer, otherwise the Settlement Agreement won’t be binding. If you were just to sign it and send it back then the document would not be valid, which defeats the purpose. This also helps explain why the Employer generally pays for the cost of that legal advice – it is in their interests to do so. Settlement Agreements will have an adviser’s certificate attached to it confirming that they have provided independent legal advice to the employee about the terms and effect of the Agreement. If proceedings have already been issued, a template letter withdrawing those proceedings may also be attached.

The employer pays the employee’s legal fees. Most of our clients to not have to pay anything more as most cases are relatively straightforward. Where matters are more complicated or contentious, we will inform you if we think the case may involve extra costs - and at what point they would be incurred. You can then decide what to do. For example, if we consider that the offer on the table is unreasonably low and does not properly reflect the strength of your position, one of your options could be to instruct us to negotiate for more. This could be on a ‘time-spent’ basis or even on a ‘no-win/no-fee’ one. You will not get any nasty surprises or unexpected bills. The amount of the legal costs contribution by your employer will differ with each case. The minimum is around £250+vat - but can be much more.

Contact us to arrange a preliminary, no-obligation chat. We will be able to advise you very quickly - and in clear and practical terms. Our first consultation is free giving you the choice of whether you wish to instruct us. 

We can act swiftly so that matters are concluded as quickly as you wish. If after an initial chat you confirm for us to proceed, generally our first appointment will on the phone and last around 20-30 minutes. We will explore the background of the matter with you and discuss the circumstances in which the Settlement Agreement was offered. We will need to consider what claims you have or may have against the employer and, if appropriate, we can advise you about the potential value of such claims.

The second aspect of our role as the legal adviser is to advise you upon the terms and effect of the Settlement Agreement itself and ensure you understand it. You must never sign something you do not fully understand.

We go through the draft Settlement Agreement with you, advise you in detail upon the content and you will have the opportunity to ask any questions that you wish to. There is no question too trivial to ask – the only mistake would be to not ask the question in the first place. Your understanding is key.

At the end of the appointment we will advise you about your options as we see them as well as advising you of any amendments that could be made to the Agreement.

How you choose to proceed is your choice. Our role is to ensure that you have received personal and professional advice upon the terms and effect of your Settlement Agreement and that you fully understand the document to make an informed and confident decision on how to proceed.

About two thirds of clients are prepared to sign at the end of that first appointment. Our job then is to ensure a copy signed by you and us, as your legal adviser, is returned promptly to your employer. In due course you will receive a fully executed (signed) document. Only then will it be a legally binding contract.

It depends on why that is. You can be happy in principle to accept a Settlement Agreement, but unhappy with the proposed termination payment or other major term. More rarely, you might decide that you do not wish to accept any kind of Settlement Agreement and look to stay in your employment and take a Tribunal case. We will be able to discuss that with you.  

In the former case though, you can instruct us to negotiate on your behalf. How involved such work will be depends on the underlying factual and legal matrix.  No two cases are the same. At one extreme it might prove impossible to improve the terms. However, we are often able to enhance the exit package on offer. If you wish to try and improve the terms on offer, use our experience to advise you on prospects and conduct the negotiations. We will keep you fully updated as we go.

Yes. If the package that you’re being offered under your settlement agreement isn’t what you want, and cannot be sufficiently enhanced by negotiation, you need to weight up with your solicitor what the various costs and benefits are to settling or rejecting the settlement agreement and potentially litigating.

Usually the following types of claim are excluded from your settlement agreement. That means you can pursue them regardless of signing

  1. A claim for your accrued pension
  2. A claim for any personal injury (nb. personal injury of which you are not aware of or was not reasonably foreseeable as at the date of the agreement); and

Any claim to enforce the settlement agreement itself

Confidentiality is a key reason for entering into a settlement agreement in the first place. Settlement agreements will usually contain a confidentiality clause, which has two purposes; first, to ensure that the terms of the agreement itself remain confidential; and second, to limit what you are able to tell others about your employer’s business.  Some employees can look to use this to leverage a better package, but in our experience this rarely makes any difference as confidentiality is so part and parcel of a Settlement Agreement.

While an NDA (Non Disclosure Agreement) is not the same as a Settlement Agreement, the confidentiality clause within a Settlement Agreement has a similar effect. However, Settlement Agreements in some sectors cannot stop you from making protected disclosures within the meaning of s43A of the Employment Rights Act 1996.

Unless you are required by law to do so, you must not discuss your settlement agreement with anyone else, which includes the circumstances surrounding your departure from the business. You will still be able to speak to a limited number of people, including your immediate family and professional advisers, provided they also agree to keep the information confidential.

You must not use or disclose any trade secrets or confidential information about your employer unless they give you permission, or you are required by law to do so. Your settlement agreement should contain a definition of what your employer classes as confidential information, but this will usually include information about the way in which the business operates including its processes, financial information and information about customers and suppliers.

Whilst this may sound draconian, it is completely standard. You will already owe your employer a duty of confidentiality which will be implied into your employment contract in the absence of any express confidentiality clause. Your settlement agreement will most likely restate any confidentiality provisions contained within your employment contract to make it clear that they survive termination. Your employer may also include new confidentiality restrictions which broaden the scope of the original obligations within your employment contract and require you to sign a statement confirming that you have complied with this clause.

The confidentiality clause will prevent you from speaking to your colleagues about your settlement agreement. You may therefore have concerns about what you can tell them about your reasons for leaving the business as well as what to say to future employers when discussing your employment history. We will address any such issues as part of our instruction and advise you how to approach it.

Your termination payment will be dependent upon your compliance with the confidentiality obligations under this confidentiality clause and therefore it is important to have a good understanding of what information you can or cannot share.

This is the best time to agree such terms. Often the Employer proposes the approach but at this point your ability to influence that is strongest. It is usually in both parties’ interests to stick to the spirit of agreement and settle on something fairly neutral.

If your employer offers you an exit package or a settlement agreement then they may also use one of the following terms:-

While not always used, they are very common legal terms in this context. If they are abused, they are not valid.

Briefly stated, these legal concepts have evolved by common law and statute to facilitate settlement. They allow parties to lower their guards and talk frankly. So long as certain conditions are met, what is discussed cannot be referred to in a Tribunal hearing.

Whether these concepts are validly used can be a point of dispute. Improper behaviour can invalidate their cloak-like nature. In a recent pregnancy discrimination case, an Employment Tribunal agreed with us that the employer’s use of such terms was an abuse. The Tribunal allowed highly damaging communications by the Employer to be referred to in a Hearing.  Off the back of this, our client secured a high-level settlement from a US law firm.

Although our job is to provide you with legal advice on the terms and effect of your settlement agreement, it is not for us to tell you whether to sign your settlement agreement or not – only you must make this decision. If you instruct us to advise you on the merits of your Employment Tribunal claims and whether the value of the settlement agreement represents a “good deal”, we aim to give you the best possible information to allow you to make an informed choice on signing. We will then only sign Adviser’s Certificate in the settlement agreement if you confirm that you want to proceed with it.

That is an option that a small number of our clients choose. If so one practical point to be aware of is that often the employer will not make any payment towards costs and so you would normally be billed for our time spent on your file. You will bear that in mind when deciding whether or not to arrange an appointment or seek legal advice.

1. Proof of ID – Regulatory requirements mean we will need to take proof of identification from you at our appointment. Normally that would be in the form of either a passport or a driving licence (photo ID) plus a recent utility bill or bank statement (your address);

2. A copy of the draft Settlement Agreement itself;

3. Your Contract of Employment;

4. A recent pay slip;

5. All correspondence relating to the Settlement Agreement offer or the termination of your employment.

Should anything further be needed we will let you know as we proceed.

If you still have any questions, simply get in touch – we are sure we can provide you with an answer