Settlement Agreements

Overview of Settlement Agreements

When the relationship between employer and employee irretrievably breaks down, one solution is for both sides to enter into a ‘Settlement Agreement’ (which used to be known as ‘Compromise Agreements’).

A Settlement Agreement is a legally binding agreement which allows the employee to receive an agreed tax free lump sum (plus an agreed reference in certain cases) in return for agreeing not to pursue their case to an Employment Tribunal or the civil courts.

The employer’s solicitor usually draws up the Settlement Agreement. To be valid, the Settlement Agreement must be in writing, specify the dispute being settled, and state that the conditions governing Settlement Agreements have been complied with. The employee must also have received independent legal advice on the Settlement Agreement from a qualified person insured to provide it, such as their solicitor, and the Settlement Agreement must identify who that person was. Usually, the employer pays the costs involved in the employee taking this advice. As settlement agreement solicitors, we can be relied upon to provide quality independent legal advice on the settlement agreement.