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Settlement Agreements and attention to detail

Settlement Agreements and attention to detail


Case study

Settlement Agreements are the only enforceable means by which an employee can agree to waive their legal rights to pursue employment related claims in either the court or employment tribunal. They are commonly used by employers following a 'protected conversation', where there is potential for a dispute or when managing redundancy related situations. It is a legal requirement for the employee to take advice upon the meaning and effect of the terms of any such Agreement but it pays for the employer to take advice on the suitability and application of the terms in individual cases too, rather than just relying on the use of precedents. The discussions leading to a settlement can also be tricky to manage, despite their ‘protected’ nature.

Settlement Agreements can include other useful additional or special provisions, for example to tie in director resignations and dealings with shares or simply to agree wording for references and announcements. They can be complex and invariably lead to questions concerning the tax treatment of payments and the potential indemnities that may be required. In all cases it is of vital importance to pay attention to the detail and to take advice particularly when more than a standard approach is required.

The following case is an example of how we are able to advise and assist in this area:-

We prevented an employer from falling into difficulty by identifying that the ‘entire agreement’ clause of its ‘standard’ Settlement Agreement, that it intended to issue to a departing key employee, would effectively replace the continuing obligations and restrictions of his employment contract.  Fortunately, we were able to amend the settlement terms to ensure that the restrictive covenants and confidentiality clause were preserved. We also further reinforced the protection provisions required for the business through a more bespoke Settlement Agreement.

We were able to amend the settlement terms to ensure that the restrictive covenants and confidentiality clause were preserved.

In order to ensure more adequate protection for this particular business, and to reinforce protection provisions, we advised the preparation of a bespoke Settlement Agreement.