How To Negotiate A Settlement Agreement

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A settlement agreement is a legally binding contract used by employers that sets out the agreed terms and conditions to resolve a workplace dispute, or to bring an employee’s employment to a mutually agreed end.

A settlement agreement will usually involve the employee agreeing to give up their rights to bring a claim against an employer in return for a payment. The contents of a settlement agreement can differ considerably reflecting the particular circumstances that led to a dispute arising.

It’s therefore highly important that any settlement agreement is fair, comprehensive and not too onerous on the employee and their future career.

Is a Settlement Agreement Negotiable?

There’s no requirement for an employee to negotiate a settlement agreement, but they do have the right to negotiate its terms. For some employees, maximising the amount of financial compensation that’s awarded to them will be the key concern. For other employees, the type and number of restrictive covenants will be the main concern following the termination of their employment.  Care should be taken as any counter proposal can technically be treated as a rejection of an offer.

How Long Do Negotiations for a Settlement Agreement Take?

The length of negotiations will depend on the details of the dispute and any particular concerns and requirements that either party may have.  While there is no requirement for either party to use a lawyer, skilled employment law specialists will be able to minimise the time it takes while ensuring that each party has sufficient time to make an informed and considered decision. Employees should be given at least ten days to make a decision on the terms set out in any settlement agreement.

Don’t hand in your Resignation until a Settlement Agreement has been reached

If you’re in a dispute with your employer you may feel tempted to hand in your resignation to try and bring the matter to a close sooner. However, it’s not advisable to resign before you have sought legal advice as it could weaken your hand when it comes to negotiations. If you submit your resignation it can make it difficult to obtain a decent level of compensation and you may not be offered any compensation at all.

If your employer attempts to make work unbearable for you in order to try and encourage you to resign, then this could be termed constructive dismissal. If you remain in employment the employer will then need to agree on a settlement amount in order to bring your employment to an end and remove the risk of a potentially more costly claim being made at a later date.

Take your Employer’s Position into Account

A reasonable and prudent employer will enter negotiations with a range of priorities in mind. They will, in all likelihood, want to bring a potentially disruptive situation to an end as quickly as possible while minimising the amount of compensation they’re required to pay. They may also have other priorities, such as confidentiality and the protection of information that may be useful to competitors.

You can then consider how much of what they want is reasonable, how willing they may be to move, particularly in terms of compensation, and what agreeing to their terms will mean for you.

You are under no obligation to accept the terms of a settlement agreement and initial proposals may be negotiated further until a satisfactory agreement is reached. While some employers may be acting unreasonably, in which case a compensation claim may be necessary, in most cases employers are rational actors. They will want to protect their interests while doing what they can to bring the situation to a close.

Be Hard-headed but Realistic

Successful settlement agreement negotiations on behalf of the employee usually combine a combination of realism about what can be achieved, along with a focus on their main goals. Agreeing too readily can bring the situation to a close, but it might mean that the financial settlement you receive is less than it could be, or what you might need.

Deciding on your priorities beforehand can help, as well as understanding what is achievable. An experienced employment lawyer will be able to advise you about compensation levels and what you should expect for your particular situation.

Employers in this situation will want to save both time and money, as well as the possible negative publicity consequences of being embroiled in an employment tribunal claim. As well as any financial settlement, an agreement also helps the employee avoid the stress and uncertainty of a tribunal claim.  Finding common ground is key and overly ambitious financial claims are unlikely to be successful.

The Key Points of a Settlement Agreement

Once a settlement agreement has been signed, an employee is no longer able to make a compensation claim against their employer in a tribunal or court for any ongoing or future claims. This applies both to the employee as an individual and any potential group claims unless the agreement states otherwise.

A limited set of rights should still be protected by the agreement, and any requirements an employee might have, such as a fair and detailed reference, can be included in the agreement. In return for waiving most of their rights, employees can expect to receive financial payment. Before signing the agreement an employee should consider if the amount being offered truly reflects the seriousness of the dispute.

Once the agreement has been signed by both parties it becomes legally binding and can be enforced by either party.

Freeman Jones Solicitors can help you negotiate a settlement agreement that meets your priorities and allows for a dispute to be satisfactorily resolved.

Our experienced team are always happy to provide confidential advice. Call 0333 009 0808 or email to find out more.

More on Settlement Agreements from Freeman Jones Solicitors

Settlement Agreements vs Redundancy

Getting a Job After a Settlement Agreement

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Author Colin Freeman View Profile
Colin qualified as a solicitor in 1998. He specialises predominantly in family law, litigation / dispute resolution, wills, probate and settlement agreements and has notable cases reported in the Court of Appeal and High Court.
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