Your Settlement Agreement Solicitor

The Settlement Agreement Solicitor

Episode 2: What is a Settlement Agreement?

Hello, and welcome to The Settlement Agreement Solicitor podcast, your go-to guide for everything you need to know about settlement agreements. I’m Geoffrey Caesar, a solicitor with over 20 years of experience in settlement agreements, and in today’s episode, I’ll be answering a fundamental question: What is a settlement agreement?

Whether you’re an employee or an employer, this is a term you might need to understand, so let’s break it down.

What Is a Settlement Agreement?

A settlement agreement is a legally binding contract between an employer and an employee. Under the terms of a settlement agreement, the employee agrees to waive their rights to bring certain legal claims against the employer. In exchange, there’s usually a financial settlement involved.

Think of it like a clean break: both parties walk away with a clear understanding of the terms, and the employee receives some form of compensation, typically financial.

You may have heard the term ‘compromise agreement’ in the past. It’s a term that might still occasionally be used today, but back in 2013, compromise agreements were rebranded as settlement agreements, thanks to the Enterprise and Regulatory Reform Act 2013. The switch was to make things clearer and more accessible, moving away from the negative connotations of the word “compromise.” Governments have long preferred that employees and employers settle their differences without recourse to the Employment Tribunal, and the rebranding of compromise agreements as settlement agreements reflects that.

Key Features of a Settlement Agreement

Now, let’s discuss the key features that distinguish a settlement agreement from other types of agreements or contracts:
Waiver of Claims
The employee gives up their right to bring certain legal claims, such as unfair dismissal, discrimination, or breach of contract.
Financial Compensation
The employee usually receives a financial payout. How much? Well, that depends on the situation, and each agreement is tailored to the specific circumstances.
Independent Legal Advice
For the agreement to be legally binding, the employee must get independent legal advice. That’s where people like me come in.
Confidentiality
Ever wonder why people don’t talk about these agreements? They often include confidentiality clauses, preventing either party from discussing the existence or terms of the agreement. There are exceptions, though—such as discussing it with your solicitor, partner, or tax advisor (and I’m not ranking those in order of importance!).
Mutual Agreement
No one can be forced to accept a settlement agreement. Both parties must agree to the terms voluntarily.
The Legal Framework

Of course, there’s legislation behind all of this. The Employment Rights Act 1996 and the Equality Act 2010 are two key pieces of legislation that govern settlement agreements. Over the years, case law has clarified points of ambiguity, leading to the fairly standard format we see today. However, keep in mind that settlement agreements can vary widely—some might be just a few pages long, while others can run to dozens of pages.

Any solicitor specialising in this area of law must have an in-depth knowledge of the entire field of employment law. It’s crucial to use a solicitor who specialises in employment law to review and advise you on your settlement agreement.

Section 203 of the Employment Rights Act 1996 is particularly important, as it allows employees to waive certain employment rights, provided specific conditions are met. This is the foundation of a legally binding settlement agreement.

What Makes a Settlement Agreement Valid?

There are six key ingredients required to make a settlement agreement legally valid:
The agreement must be in writing.
It must relate to specific claims—actual or potential—that are identified in the agreement.
The employee must obtain advice from a relevant independent advisor.
The agreement must name the relevant independent advisor.
The advisor must have insurance to cover the risk of an employee’s claim.
The agreement must reference that the statutory conditions under the Employment Rights Act 1996 have been met.
The term "relevant independent advisor" has a specific legal meaning in the context of settlement agreements, but I’ll cover that in more detail in a future episode. The key point to remember is that if you receive a settlement agreement—or think you might—it’s crucial to contact a solicitor who specialises in this area of law.

Final Thoughts

So, a settlement agreement is essentially a formal deal where the employee agrees not to pursue legal claims in exchange for compensation. It’s often a win-win for both parties, especially when both sides want to resolve matters amicably and move on.

And remember—getting independent legal advice is non-negotiable if you want the agreement to be legally valid.

That’s it for this episode of The Settlement Agreement Solicitor. If you’re facing a settlement agreement or just want to learn more, be sure to subscribe to this podcast for more tips and insights.

I’m Geoffrey Caesar, and I’ll catch you in the next episode.