When might settlement agreements be used?

A settlement agreement is used to agree terms in which an employee terminates employment and prohibits the employee from making any legal claims against their employer, in respect of their employment. This is usually in exchange for a cash settlement or other benefits such as a reference.

A settlement agreement can be used in a wide variety of circumstances. These circumstances can include:

  • Redundancies
  • Performance management at work
  • Long Term sickness issues
  • A clash of personalities
  • Transfer of a business
  • As a way to settle grievances

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Ongoing issues

Settlement agreements may also be used in situations where ongoing issues have been identified. These issues could include alleged acts of discrimination or in circumstances where an employee and an employer cannot overcome a grievance as confidence and trust may have completely broken down. A settlement agreement is often the best way for both parties to terminate their relationship on terms that they agree on.

A settlement agreement may also be brought about where an employer feels they do not have the time or money to defend a claim in front of an employment tribunal.

An employer has the option of using a settlement agreement to remove an employee where there is an issue regarding   performance or redundancy situation and remove the risk of this employee taking a claim to the Tribunal.

If you have been asked to sign a settlement agreement or wish to draw one up regarding one of your existing employees, speak to the expert solicitors at Stephensons today. It is imperative that you understand that a settlement agreement is not legally enforceable until it has been reviewed and approved by an independent legal team. This is to protect your rights and ensures you are aware of all the parameters that have been outlined within your settlement agreement.

For more information, or to speak to our legal team about settlement agreements, contact the expert solicitors at Stephensons today on 0203 816 9302​ or complete our online enquiry form.

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