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What should I do if I've been offered a Settlement Agreement?

Redundancy can sometimes involve a settlement agreement, but what are these agreements? And should you sign one? Our Litigation solicitor, Christopher Thomas explains how these agreements are used in redundancy and what you should do if you are given one to sign.

Redundancies have unfortunately become a part of everyday modern life. In the last few months, we’ve seen reports across various sectors announcing restructuring plans and job losses, for example, the Shaw Trust in August 2019.

No one wants to go through the process of redundancy, and it can be a very worrying and upsetting time, especially when they don’t understand the process. You are often asked not to discuss the proceedings with anyone, which again can add to the distress felt.

What are settlement agreements and when are they used in redundancy?

Settlement agreements (formerly called compromise agreements) are legally binding agreements that set out the full terms of a settlement between an employer and an employee and once signed, they stop the employee from suing their employer. As they are legally binding, you need to take legal advice before signing. In the majority of cases, they include a financial payment to the employee, a confidentiality clause, and they may also include a reference.

Redundancies do not always lead to settlement agreements. Employers who believe they done everything right and 'by the book' may decide to dismiss an employee without any kind of agreement in place or an exit package. And in turn, settlement agreements aren’t always tied with redundancy as they are often used to resolve disputes between an employer and employee.

You’ve been offered a settlement agreement – what should you do?

  • Try to keep calm and take notes

This is easier said than done as going through the settlement agreement process can be a very distressing time. But try to ask questions, write everything down, and remember – you do not need to make any decisions at this stage.

  • Get legal advice

A settlement agreement will only become binding once you have received independent legal advice on it. Your employer may recommend a solicitor to you, but you are free to choose your own. In either case, your employer may pay all or part of the solicitor fees for you.

A solicitor, who specialises in employment law can help you determine whether you’re getting a good deal and assist you in further negotiations if necessary.

  • Make a decision - to sign or not to sign...

To decide whether an agreement is a good deal, you need to weigh up why you’re being offered the agreement and what rights you are being asked to give up by signing it. If you don’t sign the agreement, you retain your right to make a claim against your employer at a later date. Your solicitor will advise you on the likely outcomes of each possible course of action and make recommendations for how to proceed.

Never be afraid to ask questions about any part of the process – your lawyer is there to help you.

About the Author

Christopher Thomas is an experienced Litigation solicitor with a wealth of knowledge on employment law, in particular with Settlement agreements. Contact Christopher today for a free initial assessment of your legal matter or arrange an appointment at our Crystal Palace office by calling our office on  020 8771 5254.

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