A settlement agreement is a legally binding contract between the employer and the employee, and will outline the terms of a dispute resolution. Both parties usually reach such an agreement after negotiations, where the working relationship has become untenable.
What is the purpose of such an agreement?
The settlement agreement is often used when an employee has a claim against their employer, such as a wrongful dismissal or discrimination claim. It is a way for both parties to avoid the costs and risks associated with a court case. It enables an employer to protect its reputation by avoiding any negative publicity.
By using settlement agreement solicitors, an employee will be made fully aware of their rights and obligations. Settlement agreement solicitors will discuss the agreement, which may include a clause that states that the employee is waiving any potential claims against the employer and that the employee is not allowed to discuss the details of the agreement with anyone else.
The Pros of a Settlement Agreement
Cost Effective – A settlement agreement is often a more cost effective way to resolve a dispute compared with going to court. It eliminates the need for litigation which can be costly, and can usually resolve a dispute quickly and efficiently.
Flexibility – Settlement agreement solicitors can tailor an agreement to the needs of both parties, which allows for a more flexible resolution to the dispute.
Privacy and security – The agreement is a private arrangement between the parties involved, and clauses can be added to ensure that privacy is maintained. Financial settlements will remain confidential. The agreement adds a level of security by ensuring that such matters can be kept away from the public domain. A solicitor will adhere to The ACAS Statutory Code of Practice, which is designed to help employers and employees fully understand the implications of an agreement before their employment contract is terminated.
The Cons of a Settlement Agreement
Limits – Once the settlement agreement has been agreed, the binding contract cannot be renegotiated.
Biassed outcomes – One or both parties may feel that the outcome of the settlement is unfair, as the agreement itself is based around a willingness to compromise rather than an independent review of the case.
“Without prejudice” principle – This principle can allow both parties in a dispute to make statements or offers to settle without having those statements or offers used against them in court. This means that offers can be made that are not in good faith. Likewise, offers might be made without using facts from the case, effectively meaning that the “without prejudice” principle can be used to undermine the law.
It is important to seek the advice of an employment solicitor when considering a settlement agreement, as they can provide invaluable advice and guidance on the terms and conditions of the agreement. An employment solicitor can help to ensure that the agreement is fair and reasonable and that the employee’s rights are protected.
