This is an important question, and one that every employee who is presented with a settlement agreement should ask. But it’s a stressful time for many people, and sometimes what seems like an obvious question simply gets overlooked.

The thing is, when an employer first introduces the idea of terminating a position of employment, the raising of the subject might be coming out of the blue for the employee, or it might not. Either way, though, it’s still not a nice conversation to have. The most important thing an employee can do in these circumstances, therefore, is go and get independent advice.

However, it’s also useful to do a bit of background research on the topic in advance of taking advice. So we thought it would be useful to publish a series of articles specifically focusing on the subject of settlement agreements, so anyone presented with this situation can start to formulate the questions they’ll need to ask of their adviser.

First off, what is a settlement agreement?

Put simply, it’s a formal agreement between an employer and an employee often dealing with the termination of employment of that employee; though it may cover other claims too. It’s a significant document that should be taken seriously, not least because an employee gives up certain legal rights if they sign one. One such right is that an employment tribunal will have no jurisdiction over, and thus cannot then hear, any claims that are covered by the settlement agreement once it’s signed. And that’s not something to give away lightly. Getting independent advice, therefore, is critical.

Does a settlement agreement have to meet certain requirements?

In a nutshell… yes. To ensure an employee is protected, because they may not be aware of all their rights at the time the subject is raised, a settlement agreement has to fulfil certain criteria. These include

• That it is set out in writing.
• That it relates to a particular complaint(s) the employer has.
• That the employee can name the independent adviser from whom they have obtained advice in specific response to having been presented with a settlement agreement.
• That the independent adviser the employee has liaised with is covered by professional indemnity insurance. NB: If the independent adviser is a solicitor, then they must hold a current practising certificate.
• That the agreement states that the legal requirements which relate to settlement agreements have been satisfied.
• That the employee has not been pressured into signing the settlement agreement.
• That the employee has not been given false promises or inducements to sign it.

So, if you’ve been presented with a settlement agreement and it doesn’t appear to meet these requirements then it’s very likely that it’s not valid. To be sure, though, take independent advice as soon as you can.