A settlement agreement is a document that sets out an employee’s agreement not to pursue a claim against the employer.
It used to be called a Compromise Agreement. As an employer you would offer a settlement agreement to an employee where you suspect that a claim may come, or where you just want to ensure one does not.
Basically, the employee signs away the right to pursue any employment-related claim against the employer.
There are many conditions of a settlement agreement, the main ones are that:
- The employee must receive independent legal advice.
- The agreement must be in writing.
- The agreement must relate to a specific claim that the employee could bring against the employer.
We can draft a settlement agreement to fit the circumstances of the case in question and can advise you how to proceed in offering it to the employee.
When would we use a settlement agreement?
Typically, you would introduce a settlement agreement in the following circumstances:
- Performance management issues
- Long term sickness
- To deal with a grievance
- Upon the transfer of a business
By using a settlement agreement, you can be sure that the employee will not bring a claim in the employment tribunal.