Settlement Agreements

I’m entering into a Settlement Agreement with one of my employees. I understand that my employee has to obtain legal advice and I am sure my solicitor will be able to give me a preferential rate. Can I ask my employee to gain legal advice from that solicitor?

The hard and fast answer to this question is ‘no’. Before signing a Settlement Agreement, an employee should not just receive legal advice, but independent legal advice. When talking about independence in this context, it means that the legal advice that a solicitor gives to an employee should not be influenced by any connections he/she may have with the employer. For example, if a solicitor has a business relationship with an employer, the solicitor may feel pressurised into giving advice which may have differed if it had not been for the business relationship. To avoid this situation, the employee should be given the opportunity to use a solicitor of his/her choosing. As such, employers should be aware of this and should not restrict the employee’s choice.

The employee hasn’t got a contract of employment. Can I still include restrictions on the employee’s actions in the Settlement Agreement to protect my business?

Even if an employee doesn’t have a contract of employment, you can still include provisions in the Settlement Agreement restricting an employee’s actions after he/she leaves the business. You may want to restrict the employee from divulging confidential information or you may wish to restrict the employee from working for competitors in a particular area. As long as you are protecting the interests of your business and the restrictions are reasonable, these can be included and enforced in a Settlement Agreement. Once the employee has signed the agreement, these restrictions will be legally binding on him/her in the same way as if they were included in a contract of employment. So, if the employee then divulges confidential information or works for a competitor, you will be able to take legal action against him/her.

If you would like more information on Settlement Agreements click here.