One of the most common ways of ending an employment relationship is through a Settlement Agreement. This is a legally binding contract and contains agreed terms that can be negotiated.
Normally it is proposed by employers, but it can also be proposed by an employee at any stage during employment. It will usually offer some form of payment to the employee plus a reference, in exchange for a waiver of the employee’s rights to bring a claim in an Employment Tribunal or the civil courts.
Although often used to resolve a workplace dispute, it can be used where either party wishes the employment to end on agreed terms.
For a Settlement Agreement to be valid, certain conditions must be satisfied:
- The agreement must be in writing
- The agreement must relate to a “particular complaint” or “particular proceedings”
- The employee must have received legal advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on the employees ability to pursue any rights before an Employment Tribunal or the civil courts
- The independent adviser must have a current contract of insurance, or professional indemnity insurance, covering the risk of a claim against them by the employee in respect of the advice
- The agreement must identify the adviser and state that the conditions regulating settlement agreements have been satisfied