Partner Article

Chris Macwilliam, Head of Employment Law at Clough & Willis Solicitors, discusses the rise of settlement agreements in redundancy situations

A settlement agreement is a legally binding contract between an employer and their employee which settles claims that the employee may have against their employer. Since the start of the COVID-19 pandemic, their use has been rising and tend to be used in connection with ending someone’s employment due to redundancy. They can be complex so it’s important to know the detail and how you will be affected.

Why might an employer ask you to sign a settlement agreement? A settlement agreement is not really needed to make you redundant but your employer may want you to sign a settlement agreement because it sets out in writing your agreement to not take any legal or court action against them once your employment has ended.

Do you have to sign to a settlement agreement? No. You can refuse completely or negotiate the terms offered. A specialist employment law solicitor can help you get the best terms possible for you and this could include an increase in the compensation offered and a reference and will check to see if any of the terms offered will restrict your ability to get another job.

If you’re happy with the terms and don’t want to negotiate what do you do next? Take advice from a specialist employment law solicitor so that you fully understand what you are signing up to and to make sure the agreement is in your best interests and that you are being paid everything that is due to you such as holiday pay, payment in lieu of notice and the correct redundancy payment. If you’re still happy with the terms you can just sign the agreement and your solicitor will provide a certificate to show he/she has advised you about it.

Do you need legal advice? Yes, it is a legal requirement as settlement agreements must be reviewed by a qualified lawyer who is insured and who will provide a certificate to confirm that he/she has advised you.

Is a settlement agreement the same as redundancy? Although a settlement agreement is often used in a redundancy situation, it is not the same as just being made redundant. A settlement agreement sets out in writing that an employee agrees to give up their rights to bring any legal action against their employer after being made redundant. Redundancy on its own is different as it doesn’t waive an employee’s rights. If you are being offered a settlement agreement it is usually because your employer is paying you more than just a statutory redundancy payment and by signing the agreement you would give up your right to make a claim for unfair dismissal against your employer.

Will you have to pay for a solicitor to advise me about the settlement agreement? Yes but your employer will usually pay all or most of your legal costs.

Do you have to come to your office to sign? Not if you do not want to. In most cases things can be dealt with on the telephone and/or by email so a physical visit to the office is not needed unless you prefer to meet face to face.

This was posted in Bdaily's Members' News section by Clough & Willis Solicitors .