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Goodbye Compromise Agreements; hello Settlement Agreements


“Compromise Agreements” are now known as “Settlement Agreements” and are used to allow an employer and employee to terminate their employment relationship on agreed terms.

Settlement Agreements are commonly used to settle an ongoing workplace dispute, where there is a redundancy situation, or when both parties feel it is best to end the employee’s employment for another reason. This agreement sets out the terms the employer will offer to the employee if they leave their employment.

The agreement is a legally binding contract and is the process used to extinguish any possible claim the employee or the employer may have against the other.

Settlement Agreements have different purposes for different parties. For employees, they provide details of the payments and benefits which they will receive on leaving their job, and they give the employee a contractual right to receive them. For employers, their purpose is to record the fact that the employee will not take any legal action against them in future thereby ensuring the employer’s peace of mind.

Settlement Agreements are a particular kind of contract which derive from employment law legislation. They have to be set out in a certain format which follows the legislation and they can only be entered into if the employee has been advised by a specialist employment law adviser. Our expert employment solicitors can do just this.

There are strict requirements to ensure the employee seeks legal advice before entering into the Agreement in order to safeguard their interests. We will fully explain the terms of the agreement and its effect on any employee, so they understand what is being signed. On most occasions we are also able to recommend a number of additional post-termination clauses which will help protect the employee after leaving their employment. You may even be entitled to have all or some of your legal costs paid for you by your employer.

Further information

If you are informed that you might be offered a Settlement Agreement, or feel you are at risk of redundancy and/or being dismissed, then we would be happy to discuss your options.

Alternatively, if you are an employer and require advice upon offering and then drafting a Settlement Agreement, then we also would be happy to help.

Call 0117 325 2929 or complete our online enquiry form.

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