Settlement Agreements are quite a hot topic at the moment. I have heard them being discussed on several high profile business programmes on TV and Radio. There seems to be some misunderstandings about what they actually are, what they cover and don’t cover and the rights of those who are affected by them. Let rhw’s employment team add some clarity:

Whether you are an employee or an employer, the termination of employment can often be a time consuming and stressful process.

What is a settlement agreement for?

The aim of a settlement agreement is to enable an employer and employee to bring an employment relationship to an end with confidence and certainty. Therefore, whether you are an employer or employee, it is crucial to ensure the agreement is drafted with care and skill.

So what do settlement agreements do?

Settlement agreements can stop employers and employees bringing claims against each other after the employment relationship has come to an end. If a settlement agreement is not reached in these circumstances, each party can remain exposed to the risk of potential liability.

What are the Legal requirements of a settlement agreement?

To protect employees who may be unaware of their legal rights, the law states that settlement agreements are not legally enforceable unless they meet certain minimum requirements:

  • The agreement must be in writing
  • The agreement must relate to ‘particular proceedings’ i.e particular complaints that the employee may have.
  • The employee must identify a relevant independent adviser from whom the employee has received advice as to the terms and effect of the proposed agreement and in particular its effect on the employee’s ability to pursue their rights before an employment tribunal.
  • The adviser must be covered by professional indemnity insurance
  • The agreement must state that the legal conditions regulating settlement agreements are satisfied.

If the agreement does not comply with these minimum legal requirements, it will not be valid and an employee may still be able to pursue claims against the employer.

What terms might a settlement agreement include?

The terms included in a settlement agreement can be extensive and will vary depending on the circumstances of the particular case. However, it is common for settlement agreements to contain clauses dealing with the following:

  • The employment end date
  • Claims to be settled
  • Payments being made on termination
  • Post-termination obligations including confidentiality

rhw have the expertise to assist you and to ensure the process is made fully compliant with the law.

If you are an employee, rhw Solicitors can advise you on not just the terms of settlement being offered but also on any claims you might have against your employer.

Ending employment is a complicated arrangement and it is recommended that you seek legal advice. The Employment Team at rhw would be glad to assist you and can be contacted directly on, or by calling 01483 302000.

If you are an employer, rhw Solicitors have the experience and expertise you need to ensure employment relationships are terminated effectively and to suit the needs of your business. If you need more information, see our section on Employment Law.