Settle agreements or, as known in their former incarnation, compromise agreements are legally binding contracts aimed at preventing employees bringing claims against their employer. They are in effect a way for both employer and employee to resolve any issues they have between them without involving lengthy disputes in an employment tribunal.
Usually under a settle agreement the employee is bound not to pursue any other claims in a tribunal or court and in return they’ll get a pay off. In addition there’s usually the added condition that the employee doesn’t reveal any confidential information.
They are usually required not disclose how much compensation they received, not make any derogatory comments about the employer or anyone employed by the company and not use any confidential information in any way.
Because the employer waives their rights to bring an employment claim through a more traditional route, a solicitor or certified trade union adviser is required to sign everything off to ensure its legality.
The settle agreement is pretty much the same as a compromise agreement except the updated version prohibits discussions about the offer in an ordinary unfair dismissal claim unless there has been improper behaviour by the employer.
For a settle agreement to be legally binding there are certain conditions that need to be met.
- The settle agreement must be in writing.
- The employee must have the input of a lawyer, or union representative who will advise them on what effect the proposed agreement will have and also how it will impact on their ability to pursue any rights before an employment tribunal.
- The employee’s adviser must be identified and they also need a contract of insurance or professional indemnity insurance.
- The settle agreement must be in relation to a specific complaint or particular proceedings.
- A settle agreement must state that the conditions regulating compromise agreements have been satisfied.
Aside from the legal requirements, the contents of the settle agreement will be thrashed out between the employee and the business but the most common clauses will cover:
- Compensation for loss of employment
- Payment towards legal fees
- Waiver of any claims by the employee, including warranty that the claims listed are the only claims which the employee has against the employer.
- Re-assertion or modification of existing restrictive covenants.
What sectors of industry does it cover?
Any employee can enter into a settle agreement under certain circumstances, for example claims for:
- Unfair dismissal.
- Pregnancy or maternity-related discrimination.
- Discrimination, victimisation or harassment related to sexual orientation.
Basically, a settle agreement or compromise agreement is all about you and your employer parting company without having to go through any consultation process. For the employee it’s a chance to negotiate a settlement that suits them and for the employer it’s about solving an employment issue swiftly with as little fall out as possible.
Cases in which a settle agreement apply include:
- If you’re made redundant
- A quick settlement might be preferable to a long drawn out consultation process.
- If you’ve brought an unfair dismissal claim
- Instead of making a tribunal claim you both agree to a settle agreement.
- There’s evidence you’ve committed gross misconduct
- You may be offered a settle agreement or compromise agreement in return for you leaving your job with the minimum of fuss. In this case you might be offered a reference rather than money so that you can leave without the stigma of dismissal on your employment record.
- If you’ve been discriminated against
- Even if the company argues your discrimination claim is false they may agree to settle the issue out of court.
- You are terminally ill
- If you can no longer work because of terminal illness you could agree to resign in return for an ex gratia payment, which will be essentially given so that you won’t launch any disability discrimination claim further down the line and you may be required to sign a settlement agreement.
What severity of case does this apply to?
- You don’t have to be unfairly dismissed or discriminated against to enter into negotiations about a settle agreement.
- Settle agreements can cover anyone who has the potential to bring a claim in the employment tribunal. That could be a worker with a complaint about their holiday pay, or an unsuccessful job applicant who feels they were discriminated against at a job interview.
- It might be the case of someone suffering from cancer whose contract is terminated mid-treatment, or a person who has suffered harassment at work, or it could be an agreement is made to bypass a lengthy arbitration process.
- You have to remember that once a settle agreement is made you’ll sign a document that lists every possible type of claim you could make against your employer to ensure a line is drawn under the whole situation.
As the settle agreement isn’t legal unless a solicitor or trade union expert is involved there will be some financial outlay.
Often though, the employer often agrees to contribute to legal fees although not all costs will be covered by them. It isn’t a one size fits all situation however.
For example, if you have a more complex case or your solicitor has to become more involved, then the process might incur further expense. A good solicitor will discuss their fees with you prior to launching into negotiations so there are no surprises at the end of the process.
The upside is that the benefits of a settle agreement can outweigh the costs. For example, you can make a clean break with your employer and receive compensation more quickly and efficiently. The first £30,000 of any compensation you may receive can usually be free of any national insurance or tax deductions.
It is also possible that you will be paid in lieu of notice, which will reflect your full notice in one lump sum without having to work during this period and you will also have the security of being able to negotiate a reference to present to future employers.