Settlement Agreements for Employers

A Settlement Agreement (formally known as a Compromise Agreement) is a legally binding contract between you and an employee.

The purpose of the agreement is to provide a monetary settlement to an employee whose employment you wish to terminate, in exchange for the legally binding guarantee that they cannot bring any further action against you in a court or tribunal. The other advantage of a settlement agreement is the terms remain confidential between you and the employee.

Protecting your interests when entering into s settlement agreement

When entering into a settlement agreement the ideal situation is where the employee believes that this is the best way to end the relationship between you both. You need to ensure that the employee has no grounds to argue that they were left with no choice but to sign the agreement as the termination of employment was inevitable. This could leave you open to a claim for unfair dismissal<link to unfair dismissal topic under Business/Employment>. Ensure you maintain proper conduct at all times as incidents of bullying, harassment and victimisation while negotiating a settlement agreement can land you in the Employment Tribunal. Also be aware of any ‘off the record’ conversations as these can be used in evidence in the tribunal.

What if my employee refuses to accept a settlement offer?

If your employee rejects your offer of a settlement agreement then you must follow or return to the correct disciplinary process. You cannot terminate them for refusing the agreement as this will almost certainly constitute ‘improper conduct’.

How we can assist you

At Bennett Oakley Solicitors we can advise you on whether a settlement agreement is appropriate to your particular circumstance. If it is then our experienced lawyers will guide you through the process, ensuring it is done correctly and you are protected from any allegations of ‘improper conduct’.