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Settlement Agreements for Employers

There are a variety of circumstances in which negotiating a settlement agreement with an employee can be the preferred route in order to bring a dispute with an employee to conclusion or negotiate the termination of employment of an employee without the potential of needing to defend employment tribunal litigation.

The settlement agreement serves to prevent an employee being able to bring claims against the employer at an employment tribunal, county court, or high court, and is usually negotiated in return for a sum of money to be paid to the employee. There are specific requirements that must be met in order for the settlement agreement to be legally enforceable so as to prevent the employee from bringing claims against the employer and waiving their rights. Primarily the employee must have been advised on the terms and effect of the agreement by a relevant independent advisor such as a solicitor with a current practicing certificate who is not connected to the employer. If this requirement has not been met then any agreement to attempt to stop the employee from being able to bring claims at an employment tribunal may not be legally binding. There are other methods of concluding potential claims including settlements agreed through ACAS which are usually set out under the terms of a COT3 agreement or under terms of settlement which may have been agreed during an employment tribunal and ordered by the court. The settlement agreement however is usually negotiated and agreed either during the employee’s employment or shortly after termination of employment in order to prevent claims being lodged and unnecessary time, money, and effort spent on defending such claims.

The full statutory requirements for settlement agreements to be binding are set out under Section 203(3)(c) of the Employment Rights Act 1996 which provides:

  1. The settlement agreement must be in writing
  2. The agreement must set out the particular claims that the employee is settling under the terms of the agreement
  3. The employee must have received independent advice from a relevant advisor as to the terms and effect of the agreement and in particular its effect on their ability to bring claims before an employment tribunal. The advisor must be covered by a contract of insurance or indemnity covering the risk of a claim by the employee in respect of loss arising in consequence of their advice. The agreement must set out who the advisor is
  4. The agreement must state that the conditions relating to settled agreements have been satisfied. The employment team can advise employers in relation to the use of settlement agreements, the procedures in which these are presented to employees on a without prejudice basis or under Section 1(11)(a) of the Employment Rights Act 1996. We can guide the employer through the process and deal with negotiations with the employee or their legal representatives and provide covering letters and assistance throughout the process

In some circumstances where employers have multiple settlement agreements to be advised upon it is possible, where Biscoes is an independent firm of solicitors, that we can arrange to visit the employers premises or a neutral site in order to advise groups of employees or carry out back-to-back appointments without the disruption and hassle of the individual employees needing to make appointments and source their own legal advice. In the event this may be suitable for your business please do not hesitate to contact one of the Biscoes Employment Law team to discuss availability and the mechanics of such a process.   


For further information or to speak to one of our experts, please get in touch