What happens if I need to negotiate a Settlement Agreement?

A Settlement Agreement allows an employer and an employee to reach a mutual agreement to end a term of employment, which offers protections for both sides once the employee moves on.

If you are an employee caught up in the process of departing a company, it is important to ensure that you can preserve your reputation when you leave, receive a satisfactory reference and can move on freely.

Equally, if you are a business owner, you will wish to ensure that there is a clean break, with no opportunity for further possible acrimonious disputes at a later date.

With this in mind, negotiating a water-tight Settlement Agreement is often crucial – particularly where high-level senior executives are involved, as the process will include determining what happens to any long-term incentive awards (LTIPs) and actual and deferred bonus elements, which can often be the most valuable part of an exit package.

Regardless of the circumstances, however, seeking advice at the earliest possible opportunity is the best first step to securing an equitable settlement agreement for all concerned.

Once an initial offer is received from the employer, an employee will need to consider the value of any potential claims they may have, to decide whether the offer is fair.

Is a Settlement Agreement binding?

A Settlement Agreement is a legally-binding contract made in full and final settlement of any potential employment-related claims an employee may have against their employer.

With this in mind, it is vital that employees ensure you are completely satisfied with the terms of an agreement before signing it, as doing so will effectively ‘waive’ any potential claims in exchange for the package on offer.

What steps must an employer legally take?

For a Settlement Agreement to be valid it is important to ensure that it is legally compliant and the employee must be offered the opportunity to take legal advice to ensure that they understand what they are signing. The costs of obtaining legal advice are typically met by the employer.

As an employer, you are also expected to give the employee a minimum of 10 days to consider the terms of the agreement.

This is one of many reasons why it is best to seek advice early on – preferably before an initial offer is even made.

What should an employee do if they feel the terms are unfair?

If an employee believes they are about to be pushed out for any reason, or if they have received an initial settlement offer from an employer, it is important to seek legal advice. You should never sign a Settlement Agreement before doing so.

For further information on Settlement Agreements or to arrange a no-obligation meeting, please get in touch.

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