What Is a Settlement Agreement and Should I Get Legal Advice?

A settlement agreement is a legally binding contract between an employee and employer that settles potential or existing employment claims. In exchange for a payment or other benefits, the employee agrees not to bring employment tribunal proceedings. They are sometimes called compromise agreements, which was the earlier terminology.

When Are Settlement Agreements Used?

Employers use settlement agreements to resolve disputes quickly and with certainty, to manage redundancy exits for more senior employees, to end employment in sensitive circumstances without the risk of future litigation, and to resolve grievances that have already been raised. They are extremely common and many thousands are signed each year.

What Rights Do You Give Up?

A properly drafted settlement agreement waives your right to bring employment tribunal claims arising from your employment and its termination. This typically includes unfair dismissal, wrongful dismissal, discrimination claims, and claims under the Working Time Regulations. The agreement should specify exactly which claims are being waived: a well-drafted agreement makes this explicit.

Is Legal Advice Legally Required?

Yes. A settlement agreement is only legally binding if you have received independent legal advice from a qualified adviser, typically a solicitor or barrister: before signing. The adviser must sign a certificate confirming they have advised you on the terms and effect of the agreement. Without this, the agreement is unenforceable.

Many employers contribute towards the employee's legal fees for obtaining this advice, typically between 250 and 500. This contribution does not cover a detailed negotiation of the terms.

Is the Offer Fair?

This is the most important question. The fact that an employer is offering a settlement agreement does not mean the offer reflects what you would receive if you brought a successful claim. A specialist employment law barrister can assess the value of any potential claims you hold, advise on whether the settlement figure is reasonable, and negotiate on your behalf for a higher figure if appropriate.

Summary

A settlement agreement waives your employment tribunal rights in exchange for payment. Legal advice before signing is a legal requirement. The employer's contribution to advice fees is typically limited. A specialist barrister can advise on whether the offer is fair and negotiate on your behalf.

Take the next step with confidence. The Barrister Connect team will find you the right barrister and give you a clear fee upfront. Contact us today.