What is a settlement agreement?

A Settlement Agreement (formerly known as a Compromise Agreement) is a contract entered into between employer and employee upon termination of employment, which sets out the terms of the  agreement reached between them.

What is the purpose of a Settlement Agreement?

It is not uncommon for employee-employer relationships to encounter difficult times. Sometimes it is clear that there has been a breakdown in the relationship that is beyond repair. A Settlement Agreement gives both parties the option to mutually agree on the terms at the end of an employee’s employment and the main  purpose is to make it clear  that the employee agrees to give up their rights to pursue any claim in the Employment Tribunal in relation to their employment and its termination in return for a fair payment made by employer.

Settlement Agreements in redundancy situations

Settlement Agreements are also commonly used in circumstances where a business undertakes a reorganisation that leads to a number of employees being made redundant.

The agreement allows employees to move on quickly with a sum of money that is appropriate to their situation and seniority. It also avoids the stress of going to a tribunal, which is both a significantly longer and more costly process.

The legal requirements of a Settlement Agreement?

There a number of legal requirements which need to be met for a Settlement Agreement to be valid and binding. For example, the Settlement Agreement must be in writing and the employee must have obtained independent legal advice from a qualified lawyer prior to signing the agreement. This is important because the agreement has been signed, the employee will find it difficult to pursue any claims in an employment tribunal.

You should know…

It is important to note that there are a number of claims which cannot be waived in a Settlement Agreement, for example an employee’s accrued pension rights.

It is also important that any claims that may have been open to an employee to pursue are adequately addressed in the agreement in terms of the settlement figure, ensuring that gives fair value for their role and length of service.

Verisona Law can review your Settlement Agreement at a time and location that works for you – we have meeting facilities in Waterlooville, Portsmouth (North Harbour), Gosport and Southampton Please contact our Harvinder Pahal in our Employment law team on 02392312 074 or email Harvinder.pahal@verisonalaw.com

  • Unfair dismissal
  • Wrongful dismissal
  • Redundancy
  • Unlawful discrimination
  • Harassment and victimisation
  • Equal pay
  • Unlawful deduction of wages
  • Breaches of contract
  • Protected disclosures (whistle blowing)
  • Transfer of undertaking (TUPE)
  • Settlement agreements

Sports and Football Law

  • Contracts of Employment
  • Service Agreements
  • Contractual Issues
  • Executive Departures

"Over the years, I have developed a great trust in my working relationship with Mike Dyer, Head of Commercial Law at Verisona. One of the things I value most is that he is always at the end of a phone. On the rare occasions he is unavailable, his secretary is always well informed and very helpful. Through Mike, I have met many other members of Verisona and, just like in the recruitment industry, they understand the importance of being treated like an individual. They make me feel valued and important to both them and their business. At Verisona, you always deal with real people who you know and are in a position to help. Most importantly, Verisona delivers. We recently had an urgent situation regarding the restrictive covenants of new members of staff. Employment specialist Susan Ball came in on a day off to listen to us, dissect and analyse the situation, and translate what we wanted to achieve into the best possible legal language and solution. This is just one example of the calm, efficient professionalism I have come to value from Verisona over the years. Verisona has a refreshing approach to the law. They are there when we need them, always easy to talk to, go out of their way to make sure that we understand what they are doing for us and why, and always get the best results".

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Legally enforcing the tribunal award

To enforce the Tribunal award we applied to the Defendant’s local County Court for it to be registered and for permission to enforce the award.  

The Court granted the application and on the Register of Judgments, Orders and Fines.  As a result the Tribunal award would appear as a County Court Judgment which would likely affect the Defendant’s credit rating. 

Time limits for enforcing Tribunal awards

It is worth noting that there is no time restriction for registering or enforcing a Tribunal award. You can enforce one even if it is several years old.  In addition, it is usually possible to claim interest on the amount until you receive payment.

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"Thanks for all your help on this - you've been so helpful to me in guiding and explaining everything, so just to say thank you for obviously helping represent my case but also allowing me to understand the process and giving me greater awareness of what I need to be mindful of when signing future contracts".

Former employee of professional football club

Sue was easy to deal with and offered all options available. Jane was in contact beforehand to tell me what information was needed and Sue was prepared for our meeting. I cannot praise Sue and Jane enough and would have absolutely no hesitation in reommending Sue and her team.

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