Sean Carty discusses the advantages (and potential pitfalls) when using settlement agreements as a way of resolving workplace disputes requiring the termination an employee’s employment.
In the modern workplace, the most common way of bringing employment to an end is via a settlement agreement, formerly known as a compromise agreement. A properly constructed and negotiated agreement allows both employer and employee to part on terms that are amenable to both parties. Although common, it is vitally important for employers to ensure that settlement agreements are correctly prepared in order to protect their interests. It is also important to remember that although settlement agreements are intended to prevent employees from bringing employment tribunal claims, failure to follow the correct procedure can result in an employer losing that protection.
It takes a specialist and years of experience to advise on and draft terms that ensure that a settlement agreement is prepared correctly from an employer’s perspective. By instructing an employment lawyer at Canter Levin & Berg, you can ensure that you get a watertight settlement agreement. We can advise you on the effects of the terms on benefits, bonuses, share options, restrictive covenants, taxation and remuneration and advise and represent you in negotiations with your employee. We will advise you on what you are gaining and what you are compromising on.
A settlement agreement is only valid if the employee has taken advice from a solicitor or barrister or other recognised adviser as to the terms and effect of the agreement and its effect on his or her ability to pursue a claim before an Employment Tribunal. The settlement agreement must be in writing, identify the advisor and specify that the advisor has an professional indemnity insurance contract in place to protect the advice given. This means that it is inevitable that the draft agreement will be scrutinised by a professional so you cannot afford to take any chances.
The most common areas in which employees take advice before signing a compromise agreement are:
- Notice Pay
- Ex gratia payment
- Mobile phone
- Medical insurance
- Life assurance
- Share options
- Accrued holiday pay
- Press releases and confidentiality
In early 2013 the government announced plans for “settlement agreements” to be used instead of compromise agreements. The change came into effect in July 2013. In practice, this amounts to barely more than a name change since the overall process is effectively unaltered.
If you are an employer and you are contemplating the termination of employment of any of your employees, contact us now for expert practical assistance. We offer fixed price services agreed in advance. Alternatively, if you subscribe to Canter Levin & Berg Employment Solutions, our settlement agreements advice and support are included with your subscription. Call us now on 08000 832 832 or complete and submit our quick enquiry form.
Read more about settlement agreements here.