News Article


Using a Settlement Agreement to Resolve an Employment Law Issue

For any business, problems that arise between employer and employee can be some of the most difficult to overcome. There could be a claim for unfair dismissal, for instance, a case of discrimination in the office or the prospect of redundancies within the business.

All these can be challenging to handle effectively, for both sides, without a robust legal framework in place.

What is a Settlement Agreement?

A settlement agreement is a legal framework that sets out a binding agreement between the employer and their employee. It usually stipulates that the employee will accept a resolution and will not pursue any claim against the employer in exchange for a financial settlement. It is used mostly by employers when they want to settle an issue quickly and avoid going through a more formal procedure such as going to a tribunal or even court.

There are strict rules for producing a settlement agreement. First of all, it needs to be in writing and it needs to relate to the case in hand and set out the terms of the settlement. A key part of any agreement is that the person being offered it should have access to the relevant advice to help them make an informed decision and understand what is being offered in the terms of settlement.

The Importance of a Relevant Advisor

Legal advice is important when trying to understand all the ramifications of a document such as settlement agreement. If an employee has signed a settlement agreement without being informed of the need to get independent legal input, they may have cause to dispute the terms of the agreement at a later date. Relevant advice is vital for both sides of the argument.

What Can It Be Used For?

They are most commonly employed when redundancy is offered. When an employee agrees to be made redundant they may also be asked to sign an agreement in return for a compensation payment. This will include the terms of the settlement but may also include stipulations that, for instance, they will not work for the company again for a set period of time or they won’t make adverse comment about the company to news outlets or online.

It can also be used when there are disputes such as unfair dismissal or complaints of discrimination that need to be resolved. The purpose here is to ensure that the matter is settled quickly and to the benefit of both sides without having to go through more costly procedures.

Settlement agreements cannot be entered into without the input of a solicitor or an authorised advisor being involved in the process.  Not only does the employee need to be advised correctly but the agreement has to be signed off if it is to be considered valid.

At DSM Legal we have a wide range of experience dealing with settlement agreements for all eventualities.  Our clients include large businesses and smaller companies and employees themselves and our aim is to always provide the independent and impartial advice that our clients need.

If you are an employer or an employee and need advice and guidance on settlement agreements, then please give our friendly team a call today.