Even if people believe they have legitimate grounds to pursue a dispute at work, they often refrain from doing so for a variety of reasons. One of the most prominent reasons is what impact it might have on their career, either with their current employer or with a future one.
If they have been offered a settlement agreement as a means of bringing a dispute to an end they may hesitate to agree to it if they feel it might prevent them from getting another job.
What are the implications for your future employment prospects and career development if you sign a settlement agreement with your current or previous employer? Is getting a job after a settlement agreement more difficult?
What is a Settlement Agreement?
A settlement agreement is a legally binding contract primarily used in civil law matters. When it’s decided upon it removes the need for a drawn-out court case, saving the parties time and money.
A settlement agreement will usually be formed through a mediation process, not through a trial. With a settlement agreement, one party will agree to complete an action or pay a particular amount of money on the understanding that the other party will then stop any legal proceedings.
How does a Settlement Agreement affect me getting my next job?
In most circumstances, the existence of a settlement agreement alone will have very little impact on your ability to secure another job. However, some agreements may contain restrictions that prevent you from working for someone else for an agreed period of time. In most cases, this will be a direct competitor who could use information and contacts you bring with you to damage your previous employer commercially. These kinds of clauses are known as restrictive covenants and your employer may not agree to a settlement agreement unless they are included.
In some cases, restrictive covenants may mirror or reaffirm restrictions that are already in place in your contract of employment. You should check your original contract to see how what you’re being asked to agree to matches what it includes. In some cases, an employer may ask that you agree to conform to any restriction in your original contract.
A restrictive covenant of this kind can make it very difficult to find work. This can particularly be the case if you work in a narrow professional field where opportunities may be limited to a small number of employers, all of whom are in competition with each other.
Any restrictive covenant that is inserted should be reasonable and shouldn’t restrict you for a lengthy period of time. Nor should it be so wide that it prevents you from finding work across an entire industry or professional field. It might be possible to agree on a waiver of an existing restrictive covenant to enable you to take up employment. This can be a complex area of law and requires careful handling by an employment lawyer.
When making the agreement you may be required to affirm that you are not currently employed. This is because the level of compensation paid to you may be agreed on the basis that you might be out of work for a certain period of time.
Does my employer have to give me a reference?
A settlement agreement will often also include a clause that clarifies the willingness of your existing employer to provide you with a reasonable reference. This may be essential to help you find your next job.
There is no legal requirement for your employer to provide you with a reference, and some clauses may state they are only required to supply a ‘standard reference’. This is a bare-bones reference that outlines your job title and dates of employment and will be of little use when looking to secure employment.
Your employer is under no legal obligation to provide you with a detailed reference so it’s crucial that this is stated in the settlement agreement if you will require it for your future employment.
Can you work for the same company after a Settlement Agreement?
In most cases, a settlement agreement will be used when a contract of employment is being terminated, but this is not always the case. An employee and their employer may come to a settlement agreement to help resolve a workplace dispute while employment is ongoing.
Settlement agreements may be used to settle workplace harassment disputes, employer discrimination or disagreements over how a commission or bonus has been calculated. Even after the causes of the dispute have been dealt with, you may still be able to claim compensation. For instance, the person who was found to be harassing you may be dismissed but you may still be awarded compensation for the psychological damage that they caused. In such a situation, a responsible employer may wish to reach a settlement agreement that includes a waiver of your right to claim any future compensation.
My employer is proposing a Settlement Agreement: What should I do?
Because of the binding nature of a settlement agreement, it’s important that you have professional legal advice to ensure that what you agree is fair and doesn’t negatively impact your future prospects.
The experienced team of employment law specialists at Freeman Jones can provide confidential advice.