Settlement Agreements, Croydon
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 and many of our clients are based in south-east London including Croydon. Our office is located less than 30 minutes by car from Croydon and there is a direct train from West Croydon. We are also able to arrange appointments in Central London for the convenience of clients, and many of our clients are based in the City.
Principal Solicitor, Sunita Knight-Webb, has many 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. Prior to setting up Knight-Webb solicitors, she worked for several years in a City law firm.
If you have been offered a Settlement Agreement and would like clear, comprehensive advice on your legal rights from a specialist and a solicitor to negotiate on your behalf, please give us a call on 020 72076195.
A Settlement Agreement (formerly Compromise Agreement) is a legally binding contract which can be used to end the employment relationship on agreed terms. Their main feature is that they waive an employee’s right to make a claim to a court of employment tribunal on the matters that are specifically covered in the agreement. From the employee’s perspective, the most important terms will tend to be the payment provisions and to ensure that the employer is obliged to provide a satisfactory reference.
Typical situations in which a Settlement Agreement may be offered would include in a redundancy situation, where the employer has raised performance issues or where there is a dispute between the employer and employee which the parties wish to settle. Settlement Agreements offer the benefit of certainty and a clean break in the employment relationship. The employee has 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.
Settlement agreements are voluntary. If you are unhappy with the terms proposed, we will be able to advise you on the best approach and negotiate on your behalf. As experienced employment lawyers, we have been successful in negotiating significant exit packages for employees ranging from Senior Executives to more junior employees. If negotiations break down and you wish to commence legal proceedings in the employment tribunal, we are able to advsie you and represent you in those proceedings, having successfully represented claimants and respondents in many tribunal claims including complex discrimination and whistleblowing claims.
Conditions for a valid Settlement Agreement
For a settlement agreement to be legally valid, the following conditions must be met:
a. The agreement must be in writing;
b. The agreement must relate to a particular complaint or proceedings;
c. The employee must take advice from a relevant independent adviser (for example, a solicitor) prior to signing.
d. The agreement must identify the adviser.
e. The agreement must state that the conditions regulating settlement agreements have been satisfied.
What does “without prejudice & subject to contract” mean?
Discussions that take place in order to reach a Settlement Agreement often are undertaken on a “without prejudice” basis. 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.
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.
The ACAS Code recommends that employees are given a period of 10 calendar days to consider an offer made by an employer.
If there has been improper behaviour, the negotiations may lose their ‘without prejudice’ character. 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;
– 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.
Usual terms in a settlement agreement
The terms typically found in settlement agreements include the following:
Termination Date: This will set out when your employment has ended, or will end. This may be several months away, or very frequently, the proposed date is close to the date when you have been presented with the agreement. Your termination date will also be dependent on what notice period you are contractually entitled to and the terms in your employment contract concerning notice.
Compensation: For employees, 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. 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.
Notice: The settlement agreement will set out what notice you are entitled to, including whether you have to work that notice or not. Very often, you will be paid in lieu of notice (otherwise known as “PILON‘). Typically, a PILON payment will reflect your full notice in one lump sum (or the balance of any notice due), and also means that your termination date will be much sooner that it would have been had you worked your full notice. PILON payments will always be subject to tax and NIC.
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.
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.
New job offers: Ordinarily, you are not under an obligation to disclose future job offers (and would not be advised to do so). However, in some cases, the Agreement will require you to warrant that you have not had a job offer from a new employer. The reason for this is that is that in assessing the value of a potential claim in the employment tribunal (and therefore the settlement offer), a key consideration is your loss of earnings. If you have a job offer, this could impact on your employers decision to pay you a certain level of compensation if they knew you were simply going to walk into another job.
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.
Settlement Agreements for Employees in Croydon
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 in Croydon
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 many clients who are employers and have years of experience in advising on employment disputes. Please contact us today.
Employment Law Advice in Croydon
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
I live Outside of London, Can I still Speak To You?
Even though we are based in London, we have many clients further afield. If you are based outside of London, please contact us today and we can arrange a telephone conference.