Receiving a settlement agreement from your employer can come as a shock. For some employees, it follows a redundancy consultation or workplace restructuring. For others, it comes after a disciplinary process, a grievance or a breakdown in the working relationship. Whatever the circumstances, many people are left asking the same question – should I sign it?
One of the first things we tell clients is not to panic and not to feel pressured into making an immediate decision.
Settlement agreements are often presented with a deadline, but that does not mean you should sign without first understanding what you are being asked to agree to. Once signed, the agreement is usually legally binding, and in most cases you will be giving up your right to bring certain claims against your employer.
Many people assume that the amount of compensation being offered is the only thing that matters. In reality, there is often much more to consider.
When we advise on settlement agreements, we look at the agreement as a whole. We consider whether the financial package is reasonable, whether notice pay, holiday pay, bonus or commission have been dealt with correctly, whether there are tax implications, what reference the employer has agreed to provide, and whether the confidentiality or restrictive covenant clauses are fair and proportionate.
We also regularly advise employees who have been told that the offer is “non-negotiable” or “the best the employer can do”. Whilst that may sometimes be the case, it is certainly not true in every situation. Depending on the circumstances, there may be scope to negotiate the financial package or amend other terms within the agreement before it is signed.
Another common misconception is that obtaining legal advice is simply a box-ticking exercise. It is not. Before a settlement agreement can become legally effective, you must receive advice from an independent adviser on the terms of the agreement and the rights you are being asked to waive. For most employees, that advice is provided by an employment solicitor, which is why employers will often contribute towards the legal costs.
In many cases, employers make a contribution towards the employee’s legal fees. This means that obtaining independent legal advice often comes at little or no cost to the employee, although the level of contribution will vary from one agreement to another.
No two settlement agreements are the same because no two employment situations are the same. The reasons behind the agreement, the strength of any potential employment claims and the terms being offered should all be considered before a decision is made.
Taking advice at an early stage can often identify issues that may otherwise be overlooked. Even where the financial offer is acceptable, there may be provisions within the agreement that could affect future employment or restrict what can be said after the employment has ended. Identifying those issues before the agreement is signed can make a significant difference.
Our Employment Law team regularly advises employees on settlement agreements across a wide range of workplace situations, including redundancy, disciplinary proceedings, grievances, performance concerns and the termination of employment. We provide practical advice on the terms of the agreement, negotiate where appropriate and ensure our clients understand exactly what they are signing.
If you have been offered a settlement agreement and are unsure whether to sign it, our Employment Law team would be happy to advise you. Please contact us on 01708 446781 or by email at mail@mosco.co.uk
