A settlement agreement is a legally binding contract made between an employer and an employee. It is typically used to get an employee to waive certain employment rights, for example the right to bring a claim or proceed with their claim in the Employment Tribunal, in exchange for a sum of money.
Jones Chase has answered some of the most frequently asked questions surrounding settlement agreements in the below article.
- Do I have to get independent legal advice on my settlement agreement?
Yes. As a settlement agreement includes a waiver of statutory rights, the employee is required by law to have received independent legal advice before signing the agreement (s203(3) of the Employment Rights Act 1996).
- If so, how much does legal advice for a settlement agreement cost?
The cost of legal advice on a settlement agreement typically falls between £500 and £1,000 plus VAT. However, many employers cover this expense, often contributing a standard amount of £500 + VAT for basic advice. There is no statutory obligation for an employer to contribute to legal fees but it is standard for them to do so given that receiving legal advice is a statutory requirement.
At Jones Chase we charge a competitive £500 + VAT to advise on the terms and effect of a standard settlement agreement. Please note that this does not include assistance with negotiating the terms of the agreement.
- How long does the process take?
One of our senior lawyers can advise you on a standard settlement agreement over a call in around 1 hour or provide advice in writing on the agreement. They will then sign and send a required advisor’s certificate to your employer, verifying that you have received independent legal advice. If you would like us to negotiate the settlement agreement on your behalf or draft any amendments, this will take longer.
If the matter is straightforward we usually find that the whole process can be completed within a week, although this is largely dependent on the speed of any actions at the employer’s end.
- Can I negotiate the terms of my settlement agreement?
You have the right to seek to negotiate the terms of your settlement agreement. A legal advisor can assess whether the offer is fair and work with you to negotiate improved terms if necessary. This process often involves a series of offers and counter-offers until both parties reach an agreement. However, please be aware that some employers may say at the outset that the offer they have made is non-negotiable. You will usually be given a choice by your employer between entering into the agreement and some other action that your employer may take. On this basis you are not obliged to accept an offer and enter into the agreement.
- What are the consequences of breaching a settlement agreement?
If you breach your settlement agreement, several consequences may follow. You could be required to repay some or all the settlement amount and may also be held liable for the employer’s legal fees resulting from the breach.
Additionally, the employer could enforce the agreement’s terms or file a breach of contract claim against you, potentially leading to legal action in an Employment Tribunal or County Court.
To avoid these outcomes, it’s vital to fully understand and comply with the terms of your settlement agreement. If you suspect a breach has occurred, seek professional legal advice as soon as possible.
- What should be included in my settlement agreement to protect my rights
A settlement agreement should include key elements including but not limited to a clear termination date, details of the settlement package (including your right to notice of termination), tax treatment of the sums, payment of legal fees and often agreement on the reference your employer will provide. It will include a waiver of employment claims clause but should explicitly not waive the right to bring personal injury claims, claims to enforce the settlement agreement and/or any claims in relation to accrued entitlements under a pension scheme.
Please note that this article is for information purposes only and is not to be taken as formal legal advice. Each matter is unique and requires tailored legal advice.
If you would like advice on your settlement agreement, Jones Chase are happy to assist. Please contact lauren.sexton@joneschase.com for more information.