Quite simply, settlement agreements are a method of mutually bringing the employer/employee relationship to an end whilst protecting the interests of both parties.
The primary objective of most settlement agreements is to protect the reputation of the employer and the employee. This is done by imposing obligations on both parties to keep the existence of the settlement agreement and the reasons for terminating the employment relationship confidential save for some limited exceptions.
Prior to a settlement agreement being offered negotiations will usually take place. During the negotiation stage both parties are protected under Section 111A of the Employments Rights Act 1996, meaning that the topics of the negotiations cannot be used as evidence in any future unfair dismissal claims.
It is important to note that negotiations to bring the employment relationship to an end can be initiated by either the employer or the employee. Although in practice is it more common for the employer to initiate these negotiations.
An employer can offer its employees a settlement agreement in any number of circumstances, but some of the most common examples include:
- Company restructuring
- Redundancies
- The employment relationship is no longer viable
In turn for accepting the offer to terminate the employment relationship and keeping the terms of the settlement agreement confidential, the employer will usually make an ex gratia (voluntary) payment to the employee.
If you are an employer or an employee and need expert advice in relation to settlement agreements contact Mewies Solicitors on 01756 799000 or email info@mewiessolicitors.co.uk
Article by Darnell Alexander-Connell, Trainee Solicitor.