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Settlement Agreements

Settlement Agreements (formerly known as compromise agreements) are an effective way to compromise (or settle) any potential contractual and/or statutory claims that may be brought by an employee. 

The process can be initiated by either the employer, or the employee as a device to resolve issues or, more commonly, terminate the employment contract upon agreement and without a dispute.


Reasons for Entering into Settlement Agreements

There are a number of reasons an employer may consider a settlement agreement for an employee. Concerns about conduct, attitude, attendance and performance can all be managed through applicable internal processes, however as employers know, such processes can be lengthy, take up a lot of management time and are ultimately largely subjective and therefore, not without their risks.

To expedite the process, especially in instances where a termination of employment looks to be likely, a settlement agreement can conclude an employment relationship that has broken down in an expeditious and commercially attractive manner. A well drafted settlement agreement will ultimately give an employer the reassurance of confidentiality and importantly, that the employee will have no further recourse against the employer either in the courts and/or the employment tribunal.

A settlement agreement provides certainty and creates an opportunity to secure an outcome that avoids judicial intervention (which is often desirable).

The Employment Team at BPE have vast experience in this area. We always take into consideration the facts of the matter along with commercial considerations and we always keep at the heart of our approach, the objectives of the business.

Initiating Settlement Agreement Discussions
Depending on the circumstances, an employer would usually enter into either a without prejudice discussion or a “protected conversation” with the employee in order to discuss the overall position and possible solutions. It is important that the correct type of discussion is initiated, as each option should only be used in specific circumstances. This link to one of our blogs should be helpful in the first instance.

ACAS has produced guidance on best practice for those initiating settlement agreement discussions which can be found here. 


How Can a Business Utilise a Settlement Agreement?

Settlement agreements are therefore often a sensible way of terminating the employment relationship. A settlement agreement can deal with a number of issues, including but not limited to:

  • Notice;
  • The value of any settlement and the tax implications of the settlement payment;
  • The return of company property and confidential information and intellectual property;
  • Negotiating and/or implementing any post-employment restrictions;
  • Dealing with any ancillary issues such as bonuses, shares and share options; and
  • Agreeing the parameters of references and announcements.

The departing employee should always seek independent legal advice before responding to the proposed settlement agreement. It is a condition of this sort of contractual agreement.

BPE’s Employment Team has earned a superb reputation in acting for businesses who wish to handle and execute the departure of key employees. Settlement agreements have become a routine solution in most industries and the Employment team at BPE are very well placed to deal with all types of situations, from underperforming junior staff members to senior directors. Our wealth of experience in settlement agreements will ensure that you receive the best advice on each individual scenario. Our focus is always on the objectives in any particular situation and always to ensure the best financial and commercial outcome for the business is achieved.

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