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What is a Settlement Agreement?

What is a Settlement Agreement?

What is a Settlement Agreement?

A Settlement Agreement is a specific type contract between an employer and its employee (or ex-employee) to which both parties agree to terms under which the employee receives consideration which is often a negotiated financial sum in exchange for agreeing that he or she will have no further claim against the employer as a result of any breach.

What makes a Settlement Agreement legally binding?

For a settlement agreement to be legally binding, the following conditions must be met:

  • The agreement, though not necessarily the initial offer, must be in writing;
  • The agreement must relate to a particular complaint or proceedings;
  • The employee must have received advice from a relevant independent adviser as to the terms and effect of the proposed agreement and, in particular, its effect on his or her ability to pursue an Employment Tribunal (ET) claim;
  • The independent adviser must have a current contract of insurance or professional indemnity covering the risk of a claim by the employee in respect of loss arising from the advice;
  • The agreement must identify the adviser; and
  • The agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.

How does a Compromise Agreement differ to a Settlement Agreement?

Previously Compromise Agreements could only be used to resolve ongoing workplace issues, as a mechanism for preventing possible future complaints to the ET whereas Settlement Agreements can be used to end an employment relationship on agreed terms.

We are experiencing an increase in the number of enquiries concerning Settlement Agreements as a consequence of the Covid-19 pandemic and we expect this to increase as businesses have to make difficult decisions as the real economic costs of Covid-19 become apparent.

Contact Kerseys

Contacts Kerseys Solicitors LLP on Ipswich – 01473 213311 or Colchester 01206 584584 or email [email protected] to book an appointment (telephone or virtual appointments available).

Ipswich Office Colchester Office

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You can see our full range of employment law services by visiting our website https://www.kerseys.co.uk/employment-law-services-individuals/

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