Settlement agreements: ending an employment relationship without the drama

The Wilkes Partnership

Settlement agreements can appear to be pretty daunting things, but if one is on the horizon for you – either as an employer or an employee – there are a few simple rules you should be aware of:

  1. The agreement must be in writing
  2. The agreement must relate to a particular complaint or proceeding
  3. An employee must have received advice from a relevant, professionally insured, independent advisor, such as a solicitor, or a certified member of a trade union
  4. The agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.

If you are to be party to a settlement agreement it must be entered into on a voluntary basis and, don’t forget, once a valid agreement has been signed, an employee cannot make an Employment Tribunal claim about anything listed in the agreement.

Only claims relating to pensions, personal injury, or matters concerning enforcement of the agreement are permissible.

Reaching an agreement

This kind of agreement usually includes a payment to the employee, and an agreed reference can also be part of the deal. Reaching an agreement is based on a process of negotiation where both sides make proposals until an agreement is reached, or both parties decide agreement is not possible. If both find it isn’t possible to come to an agreement, the next steps are dependent on the nature of the dispute that bought them to this point, which means it may still involve Employment Tribunal litigation.

When you’re arranging a meeting to discuss a settlement agreement, its best practice for the employee to be accompanied rather than attending on their own. Even with the best of intentions on both sides, this type of conversation can be difficult. Having a third-party present can help to keep it moving forwards in a constructive manner.

The settlement agreement

Once both sides are satisfied with the outcome of discussions, the settlement agreement must specify:

  • The date on which the employment relationship will come to an end
  • Details of any agreed payments
  • Any non-financial terms such as an agreed reference, a confidentiality clause, or a clause preventing the employee from making derogatory comments about their former employer.

Settlement agreements are a useful tool to resolve workplace disputes without the need to undertake legal action. However, these agreements are technical, legal documents that contain important terms regarding employment rights post termination. Independent legal advice is a legal requirement for individuals but, similarly for employers, taking professional advice sooner rather than later is always recommended.

If a settlement agreement, or anything relating to employment law, is on your mind at the moment, contact Sarah Begley in the Employment team at The Wilkes Partnership on 0121 733 4312 or at for expert legal advice and practical guidance on navigating the process safely.