Employment law specialists can help if there is a serious dispute between an employee and employer that could end in an employment tribunal. They can help to replace daggers drawn with a handshake, that is, if employment lawyers use settlement agreements.

Employment law solicitors have become more interested in settlement agreements as a result of the business pressures created by covid-19. Employers have tough decisions to make if they are faced with falling incomes and unchanged costs. They have to consider making people redundant but also have to think about employees making formal grievances and engaging in other actions. Making people redundant could take up time, lead to costs and stress. So, settlement agreements can be a mutually accepted tool to deal with workplace problems and the need to reduce wage bills.

Employment law solicitors

A Settlement Agreement, or compromise agreement, is a deal between an employer and employee that ends a contract of employment or a dispute. Usually, an employee accepts benefits in return for agreeing not to take the dispute to an employment tribunal or other legal action. The agreement must be in writing and signed by both parties. The employee will have the advice of an employment law solicitor who is independent of the employer so that the agreement can be accepted by an employment tribunal.

The main points of a settlement agreement are:

• the employee cannot bring a claim covered by the agreement to an employment tribunal or court of law,

• the employee receives a sum of money and, ideally, a reference as part of the agreement,

• that discussion, negotiation, offers and counter offers are used to come to final terms,

• its terms and conditions are voluntary and the parties do not have to enter into them,

• negotiations about an agreement are usually confidential so that if a final agreement is not reached, the negotiations may not be used as evidence in an employment tribunal or a court of law, and

• reasonable time, around 10 days, should be given for the employee and his or her employment law solicitor to consider the final offer.

Avoid an employment tribunal

An employer can offer an agreement at any stage in an employment relationship. There is no legal requirement to have had a grievance or a claim at an employment tribunal.

Alternatives to a settlement agreement, if the dispute is serious, could include unfair dismissal or constructive dismissal claims. Nonetheless, there are advantages and disadvantages to using settlement agreements. The advantages are:

• providing a quick and dignified end to an unsatisfactory employment relationship

• avoiding time, cost and emotional stress of a grievance or employment tribunal case and

• providing a sum of money and a reference for employees.

The disadvantages are:

• an agreement with an employee inevitably involves a financial sum,

• the risk of not agreeing a settlement could lead to the employee staying at the workplace or taking other action,

• if the settlement is not agreed, and

• the risk of agreements being used by managers as a replacement for having professional working relationships with employees.

Another issue is how to decide how much money should be paid to an employee. There are a number of factors that should be considered:

• what the employment contract says about issues such as remuneration, notice period and untaken annual leave,

• length of employment,

• the time it could take if a dispute continues,

• how difficult it would be to fill the post,

• how long it might take the employee to find another job,

• the reasons for offering settlement, and

• the costs that could be involved in a potential tribunal or court claim if settlement is not reached.

The Arbitration and Conciliation Advisory Service points to two situations where settlement agreements could be used. If an employee, with ten years’ service, for business reasons had to move to a new job function but does not perform well. He or she may have had support from the manager but remains demotivated. Another situation is where two valued employees clash with one another. And this has an adverse impact on the performance of themselves and others. Attempts are made to improve working relations but they still do not get on. One way out of this is to offer one of the employees a settlement agreement that includes a good reference.

You can obtain specialist employment law advice from Sharma Solicitors – Employment Law. That’s it. Nothing else.

+44 (0) 345 430 0145