A Cheshire-based employment law specialist insists that obtaining professional advice is essential when considering a settlement agreement.
A settlement agreement, formerly known as a compromise agreement, is a legally binding contract between an employer and employee that sets out the agreement reached relating to the conclusion of an individual’s employment.
It can be used in many different circumstances, including handling redundancies, grievances, and provides protection for the employer, including obligations of confidentiality and tax indemnities.
Sophia Liu, an employment law expert at Warrington-based Watsons Solicitors, has seen an increase in settlement agreements since COVID-19.
She said: “There’s definitely been a rise in agreements since the pandemic with businesses not sure what the future holds.
“You see a lot of settlement agreements on the back of redundancies or the prospect of redundancies.
“Settlement agreements are often a more straight forward process than going through other avenues that might be available.
“In some cases, settlement agreements can be offered at the outset of a redundancy process to expedite a resolution and protects the employer from various potential tribunal claims such as unfair dismissal. It can also result in enhanced packages for the employee in some circumstances.”
There are six statutory conditions to which a settlement agreement must adhere to for it to be legally valid.
Those conditions are:
- The agreement must be in writing
- The agreement must relate to a particular complaint or proceedings
- The employee must receive advice from a ‘relevant independent adviser’ as to the terms and effect of the agreement, and its effect on their ability to pursue their rights before an employment tribunal
- The adviser must be identified in the agreement
- The adviser must have insurance
- The agreement must state that the conditions regulating settlement agreements have been met
If the agreement does not comply with these minimum standards, it will not be valid, and employees will still be free to pursue an employment tribunal claim.
“It’s obviously important for employers to follow the guidelines and make sure that all six points are adhered to.” continued Sophia.
“It’s often in both parties’ interests to resolve disputes, or potential disputes, quickly and without having the cost, inconvenience, and stress of having to deal with claims in employment tribunals or courts.
“One of the most interesting points is the independent legal advice for employees. Often the employer will contribute towards the cost of the employee receiving the requisite legal advice. This can be explored in each case.
“It’s important that both parties take proper advice however, and we encourage anyone who needs to take this action to speak to an employment solicitor with expertise in settlement agreements.”
To speak to someone at Watsons Solicitors about settlement agreements, please contact firstname.lastname@example.org or call 01925 571 212.
Watsons Solicitors, which has been established for more than 60 years, specialises in family law, employment law, wills and probate, and conveyancing.
The team of experienced solicitors holds various accreditations and memberships of professional bodies relevant to their expertise, while the firm’s partners oversee all areas of work.