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Settlement agreements, also known as compromise agreements, are legally binding and are used to indemnify both parties when upon the end of an employment contract. The terms are usually based around an employee guaranteeing to the employer that they will not be sued or pursued through an employment tribunal. In return the employer usually makes an ex-gratia payment and may agree to provide a specific reference.

In most cases the employer will pay for the employee to receive independent legal advice, and this is an essential part of the agreement and is needed to make any document legally binding.

The rules governing settlement agreements are contained in the Employment Rights Act 1996, especially section 203.

Employers and employees can try to reach a settlement either before or during a tribunal claim by:

  • negotiating directly and entering into the agreement
  • agreeing to an Acas conciliated settlement
  • using a private mediator
  • using judicial mediation by an employment judge where tribunal proceedings have been issued

Settlement agreements and the negotiations that precede them can be complicated and it is important to get legal advice from a specialist employment solicitor.

Contact us
At Taylor Law our employment team have in-depth experience of advising on settlement agreements as well as confidentiality clauses and restrictive covenants. We will explain the terms of any document to you clearly and answer any questions you may have.
For an initial discussion, ring us on 0113 532 8100 (Leeds), 01642 221 108 (Middlesbrough) or 0203 780 7646 (London) or fill in our Contact Form.

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