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My Employer has presented me with a “Settlement Agreement”…

What is a Settlement Agreement?

A Settlement Agreement is a binding contract between an employer and employee and can be proposed for many different reasons. Our Employment Law Practice deals with these on a daily basis. We largely see them where there is a proposal to end the employee’s employment, for example, due to a redundancy situation, a capability or conduct concern, or an employer feeling that things are “not working out”.  However, Settlement Agreements can also be used to settle grievances or disputes that may have arisen even when the employment is to continue.

employee settlement agreement






Where an employee is going to be leaving their employment under the terms of a Settlement Agreement, the agreement itself should be seen as creating a “clean break” in the majority of cases.

Provided it meets particular legal requirements, it will usually result in the employee giving up certain defined legal claims they may have against their employer. The right to claim unfair dismissal, redundancy pay or discrimination are classic examples. This is often why an employer may be keen that an employee enters into a Settlement Agreement. However, this is also why the law requires an employee to have been given proper advice on the agreement by a “relevant independent adviser” before it can be effective.

What advice should an employee receive on a Settlement Agreement?

As experienced employment law solicitors, we start by getting as much relevant detail as to the background employment circumstances as possible, so that we can properly advise our clients on the relevant issues, the potential claims that may stem from these, and the merits of entering into a Settlement Agreement.

The vast majority of Settlement Agreements will include provision for some form of payment to the employee, so it is important for the employee to understand the value of any claims they may be giving up by entering into the agreement, and the merits of those claims ie their likelihood of success. It is also crucial that the employee is advised on what the employer may do if the employee does not agree matters. Is the employer likely to proceed to disciplinary action, or even dismissal? Could this be seen as fair by an Employment Tribunal? These questions allow us to properly assess the employee’s bargaining position, and that in turn can help our clients decide if they wish to accept an agreement, refuse it outright, or have us negotiate on its terms.


Employment law solicitor reading the fine print of an employee settlement agreement


Often the focus is on the offer of financial compensation to the employee. However, the other (quite lengthy) terms of the agreement are also important. For example, employees will want to know what their rights will be in relation to matters such as shares, options, bonuses and benefits. It may be important for an employee to agree to an employment reference that they will receive, to assist their future employment prospects. Employees will also need to be aware if they may be subject to any restrictions as to where they can work when they leave the employer if their employment contract or the Settlement Agreement contains “restrictive covenants”.

These are just a few examples of issues that we often advise on, and it’s likely that there would be amendments to the agreement whether they are financial or otherwise.

How ELP Arbuthnott McClanachan can help

If you, or someone you are close to, is presented with a Settlement Agreement, or asked to consider a financial offer, we are always happy to have an initial no-obligation discussion about it, and then to advise on the situation fully. Employers may make offers to employees through a formal draft agreement, or a “without prejudice discussion”, or a “protected conversation”. We can advise on any of these with the benefit of decades of experience – because our Employment Law Practice specialises in employment law, and we represent our clients all the way from initial advice through to representation at Employment Tribunals, we are able to focus on the relevant issues and advise on the best approach.

Some clients are keen on a swift resolution, and others wish to take more time and perhaps enter into an ongoing negotiation. Some clients prefer to go through a grievance process rather than enter into a Settlement Agreement because they wish to stand up for themselves and also continue in their role. Sometimes the amount on offer from an employer is not sufficient, and clients wish to call the employer to account through an Employment Tribunal claim. We can assist in any of these situations, and we will give our clients advice based upon our experience to help them achieve their desired end result.

How to get in touch with ELP Arbuthnott McClanachan about Settlement Agreements

Any employee wishing to discuss a Settlement Agreement or an employment situation is welcome to call one of our employment law solicitors on 0131 554 8649, or email us at Ian Wells, Duncan Hamilton and Duncan McFadzean all specialise in employment law and will be delighted to assist. Further Employee Settlement Agreement information can be found on our website including information in relation to our employment law fees. Settlement Agreement fees are often covered by an employer in a Settlement Agreement, and for other employment law work, we have great value fee packages designed to allow our clients to benefit from expert advice at a reasonable cost.


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