Settlement Agreements: what are they?

A Settlement Agreement (formerly known as a Compromise Agreement) is a legally binding agreement between an employer and an employee under which the employee agrees to settle their potential claims and in return the employer will agree to pay financial compensation.

A Settlement Agreement may settle more than just employment claims but to validly settle statutory employment claims, a Settlement Agreement must satisfy several conditions that must be met. One of these conditions is that the employee must have received legal advice from a relevant independent adviser, for example, a qualified lawyer. This is why it is common practice for the employer to contribute towards the cost of the employee’s legal advice.

Other than the legal requirements, the contents of a Settlement Agreement are agreed between the employer and employee. Examples of common clauses include:

  • Compensation for loss of employment
  • Contribution to legal fees
  • Waiver of claims by the employee
  • Return of the employer’s property
  • Agreed reference from the employer

How can we help?

We help employers and employees alike with Settlement Agreements, and the process leading up to them. Since we work with both employers and employees, it only broadens our expertise, ensuring you get the best possible advice.

If you need any more information, please contact Linda Wilson at linda.wilson@macdonaldoates.co.uk.