Settlement Agreements, Bromley
Knight-Webb Solicitors are employment law specialists and have successfully advised on a large number of Settlement Agreements for both employers and employees. We are based in Dulwich in south-east London. A large number of our clients live or work within the south-east London area including Bromley, Clapham, Balham and Brixton.
As a niche employment law practice, we are well placed to advise on settlement agreements. Principal Solicitor, Sunita Knight-Webb, has advised on hundreds of settlement agreements over many years. She previously worked in a City law firm and has over 15 years of experience in advising on employment law matters. She has a degree in law from Cambridge University and is a member of the Employment Lawyers’ Association.
A Settlement Agreement (formerly Compromise Agreement) is a legally binding contract in which an employee agrees to waive his or her legal claims against the employer on agreed financial and other terms. It is usually entered into in connection with the termination of employment or where there is an existing dispute and sets out the terms of settlement between the employer and employee.
For a Settlement Agreement to be binding, certain statutory conditions have to be satisfied, including that the employee has taken advice from a ‘relevant independent advisor’ prior to signing the agreement. For that reason, it is usual for the employer to require that the employee takes legal advice prior to signing the settlement and to offer to pay towards the employee’s legal expenses.
Settlement Agreements offer the benefit of certainty and a clean break in the employment relationship. An employee will have the security of an agreement setting out what financial settlement he or she is receiving together with other important matters such as a reference. The employer on the other hand has the confort of knowing that it will not have to face a claim in the employment tribunal including for unfair dismissal or otherwise as a consequence of the dismissal. For these reasons, many employers will offer employees a settlement agreement on termination, even where they have followed a fair process or the employment has ended amicably.
Negotiatiating a Settlement Agreement
You may have been offered a settlement agreement as part of a voluntary redundancy process in which you are generally happy with the severance package offered. Or you may have been presented with a settlement agreement by your employer completely out of the blue, for example because the employer has concerns about your performance and wants to give you the option to leave under agreed settlement terms rather than go through a performance process. The approach to negotiations will of course depend on the individual circumstances. In the latter case, for example, unless you consider the offer is too good to turn down, you may wish simply to listen to what your employer has to say at the first meeting without committing yourself either way, and then take legal advice. This is because once an employee has in principle agreed to a severance payment, it may be more difficult to press for a higher settlement sum during later negotiations on the settlement agreement.
ACAS Code of Practice on Settlement Agreements
ACAS have issued a statutory Code of Practice on Settlement Agreements, which sets out how settlement agreements should operate and also provides best practice of how pre-termination negotiations should be undertaken. It gives guidance on the confidentiality provisions associated with negotiations and on what constitutes improper behaviour when such negotiations take place. If there has been improper behaviour, the negotiations may lose their ‘without prejudice’ character.
The ACAS Code recommends that employees are given a period of 10 calendar days to consider an offer made by an employer.
Examples of improper behaviour give in the Code include:
-All forms of harassment, bullying and intimidation, including through the use of offensive words or aggressive behaviour;
– Physical assault or the threat of physical assault and other criminal behaviour;
– All forms of victimisation;
– Discrimination because of age, sex, race, disability, sexual orientation, religion or belief, transgender, pregnancy and maternity and marriage or civil partnership;
– Putting undue pressure on a party. For instance:
(i) Not giving the reasonable time for considering the settlement agreement
(ii) An employer saying before any form of disciplinary process has begun that if a settlement proposal is rejected then the employee will be dismissed.
What does “without prejudice & subject to contract” mean?
You will more likely than not see this heading on a settlement agreement that you have been given, or in a covering letter/email. The phrase “without prejudice” means that communications regarding the settlement agreement cannot be admitted in subsequent tribunal or court proceedings as evidence, unless there has been improper behaviour. This includes any conversations that are preceded with “without prejudice”, which is more likely to happen where you are facing performance allegations. The reason for labelling the communications “without prejudice” is to enable parties to discuss termination arrangements freely without fear of such evidence finding its way to a tribunal if the settlement negotiations breaks down.
“Subject to contract” means that the settlement agreement will not be binding unless and until there is an agreed signed contract on the final wording. This stops either party saying that there has been a prior binding agreement.
Usual terms in a settlement agreement
The terms typically found in settlement agreements include the following:
Termination Date & Notice: Where the employer and employee are agreeing to end the employment, they will need to agree the date when the employment will end, which will be the termination date. if the employee will not be serving his contractual notice period, the agreement should provide for a payment in lieu of notice.
Holiday pay: The employee should be paid for any holiday accrued but untaken as at the termination date.
Compensation: This is likely to be the most important aspect of the Agreement. The first £30,000 of any compensation under the agreement (other than post-employment notice pay) can usually be paid free of deductions for tax or national insurance contributions. The agreement should set out a deadline for payment. Depending on the circumstances surrounding the proposed termination of employment, it is often possible to negotiate the compensation figure upwards, and this is something we will be able to discuss with you.
Tax indemnity: In light of the fact that some elements of the compensation can be paid tax free, a tax indemnity is almost always given by the employee. This makes you ultimately responsible for the payment of any tax and national insurance should HMRC determine that additional tax should be paid.
Payments up to the Termination Date: The Agreement needs to provide that you will be paid your salary, benefits, bonus and outstanding expenses up to the termination date. Please note that most benefits stop at the termination date (including life cover and health insurance), unless otherwise agreed.
Bonus or commission, deferred stock options and share awards: If you are entitled to a abonus, commission or deferred stock option or share awards, the agreement should set out how these will be treated. with unvested stock awards, the treatment will often depend if you are treated as a good leaver or bad leaver.
Pension: Where applicable, payments into your pension fund should continue up to the termination date and, where a payment in lieu of notice is being made, your employer may be obliged to continue to make contributions for an equivalent period depending on the terms of your contract.
Return of employer’s property: You will usually be required to return company property within a certain timeframe, usually on or before the termination date. If you have been allowed to retain some property such as a laptop and phone, this needs to be set out in the Agreement.
Waiver of claims: Your employer will want to ensure that the Agreement prevents you from bringing future claims against your employer. The Agreement usually specifies which claims are being waived (i.e. unfair dismissal and/or breach of contract). In any event, there will often be a long list of claims that you are agreeing to waive any right to claim under. This is entirely usual. Your employer cannot, however, compel you to waive your right to claim for any personal injury which you were not aware of at the date of signing of the agreement. You can also not waive your right to accrued pension rights, or to enforce the terms of the settlement agreement itself.
Warranties: You usually have to warrant that you are not aware of any circumstances which would have entitled your employer to dismiss you without notice (summary dismissal) prior to the signing of the Agreement. This covers the situation, for example, where you have committed some act of gross misconduct, but have been covering this up.
Reference: An employer is under no legal obligation to provide you with a job reference, so it is always advisable to make sure that one is attached to the Agreement which becomes binding on your employer. Many employers will only provide a factual reference which sets out dates of employment and the employee’s job title, particularly where the employee is leaving due to performance concerns. It may be possible, however, to negotiate a more personal reference which again, should be attached to the Agreement.
Confidentiality: This clause prevents you from discussing the terms of the settlement agreement and, in some cases, the circumstances surrounding it. You should ensure that you are able to discuss the Agreement with your immediate family, however, and you need to be able to inform prospective employers of the reason why you left, even if this is simply in general terms.
Non-derogatory clauses: There will usually be a clause which prevents you from making derogatory remarks/statements about your employer to a third party. It is important to try to ensure that there is some level of mutuality so that your employer (or named individuals) cannot make disparaging comments about you either or at least to potential employers.
Restrictive covenants: Where you have restrictive covenants in your contract of employment, these are likely to be re-affirmed in the settlement agreement. It may also be possible to negotiate a reduction or, in some cases, a complete removal of some or all of the restrictions. Where the restrictive covenants are new, these also need to be checked to see if they are too onerous and whether, in fact, you should be agreeing to them at all.
Legal fees: Most employers will agree to pay a contribution for you to receive legal advice in relation to a review of the Settlement Agreement. This will vary from employer to employer.
Conditions regulating settlement agreements: There are a number of legal conditions that must be met in order for a settlement agreement to be valid in waiving an individual’s right to bring a claim in the employment tribunal or other course. A valid settlement agreement must also state that these conditions have been satisfied.
Settlement Agreements for Employees near Bromley
If you have been offered a settlement agreement by your employers and asked to take legal advice, please do not hesitate in contacting us today. We have many years experience in dealing with employee related concerns.
Settlement Agreements for Employers near Bromley
Whether you are a large or small business, if you would like advice regarding an issue with your employees, we can help you. We have had many clients who are employers including small business and large retailers and have years of experience in advising on employment disputes.
Employment Law Advice near Bromley
As well as offering advice on Settlement Agreements, we provide advice on all aspects of employment law including:
- Contracts of Employment
- Employment Policies and Procedures
- Employment Tribunal claims
- Unfair Dismissal
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