It can be very stressful and unsettling when your employer presents you with a settlement agreement so before you sign this legal document, stop and think.

WHAT IS A SETTLEMENT AGREEMENT?

A settlement agreement is a written contract that outlines the terms under which an employee will leave their job. This document typically includes details such as the final payment, any agreed references and clauses related to confidentiality and non-disparagement. In exchange for these benefits, the employee agrees to waive their right to bring any future claims against the employer relating to their employment.

WHAT SHOULD YOU DO WITH A SETTLEMENT AGREEMENT?

Being presented with a settlement agreement by your employer can result in a range of emotions. If this document has come as a complete surprise, you may find you are stressed or worried. Or perhaps you have already been in negotiations with your employer and you are relieved to finally get this legal document. Whatever your personal situation, ensure you read and understand every detail of this document before signing.

Settlement agreements are legally binding contracts between an employer and an employee, often used to resolve disputes or end employment relationships on mutually agreed terms. These agreements can offer benefits to both parties, providing a clear resolution to potential conflicts and avoiding the need for lengthy legal proceedings.

Key Elements of a Settlement Agreement

1. Final Payment: This includes any outstanding salary, holiday pay, and possibly a termination payment.

2. Confidentiality: Both parties usually agree to keep the terms of the agreement and sometimes the circumstances leading to it, confidential.

3. Non-Disparagement: This clause prevents both parties from making negative statements about each other.

4. References: The agreement may include a clause ensuring that the employer provides a reference for the employee.

5. Waiver of Claims: The employee agrees not to pursue any legal claims against the employer in the future related to their employment.

WHY ARE SETTLEMENT AGREEMENTS USED TO TERMINATE EMPLOYMENT?

For employers, a settlement agreement can prevent potential legal claims and provide a clean break with the employee. It offers certainty and can be less costly and time-consuming than defending a claim at an employment tribunal.

For employees, such agreements can provide financial compensation, a positive reference and a clear end to the employment relationship without the stress and uncertainty of legal action.

NEGOTIATING A SETTLEMENT AGREEMENT

Negotiations can vary depending on the circumstances. Employees may negotiate for higher compensation, an agreed reference or adjustments to restrictive covenants. Employers might seek to include comprehensive confidentiality clauses or ensure that the employee waives all potential claims.

IMPORTANT ACTIONS TO BE TAKEN BY THE EMPLOYEE

It is highly recommended that before you sign a Settlement Agreement you seek independent legal advice from an employment lawyer. When an employer presents you with a Settlement Agreement it will be written by their lawyers to favour them. An employment lawyer will be able to look at the circumstances of your employment termination and the details of the settlement agreement and assess if it is a good deal. With that information, you can then decide to take one of 3 courses of action:

• Accept and sign the settlement agreement

• Refuse the settlement agreement

• Request your lawyer to negotiate the terms of the settlement agreement.