Can I ask my employer for a settlement agreement?

Whilst employers are usually the ones to take the first step in offering a settlement agreement, it is possible to request a settlement agreement from your employer. In this article our Employment Law team detail what a settlement agreement is and what you need to consider when requesting one.

What is a settlement agreement?

Settlement agreements are legal documents in which terms are mutually agreed to end an individual’s employment. They generally include the following:

• Payments that you will receive e.g. a lump sum, several months’ salary and pension contributions;
• An agreed reference;
• The option to communicate the reason for you leaving to your colleagues;
• A confidentiality clause (to stop you saying confidential things about your employer);
• Restrictive covenants (for example, to stop you working for a competitor).

By signing a settlement agreement, you are waiving your right to bring an Employment Tribunal claim in the future against your employer. You may want to request a settlement agreement for various reasons. For example, if you feel you cannot meet unreasonable performance goals, if you have had one or more prolonged illnesses or if there are tensions between you and your employer, which are unlikely to be resolved.

What are the benefits of a settlement agreement?

Offering your employer a settlement agreement as a mutually beneficial way for you to leave the company could be faster and more lucrative overall than bringing a claim in an Employment Tribunal. In addition to compensation, settlement agreements may also allow you to keep benefits such as a mobile phone or company car for a period of time after leaving.

A significant benefit is that your employer will usually pay your legal costs, to ensure that you have sought your own unbiased legal advice about the settlement agreement.

What do I need to consider when requesting a settlement agreement?

If you are thinking about asking your employer for a settlement agreement, you need to ensure that you do this on a “without prejudice” basis and that this is made clear to your employer from the outset. “Without prejudice” means that anything discussed by two parties in relation to a resolution for an actual or potential dispute cannot be used as evidence in any potential court or tribunal proceedings. 

It is recommended that you take legal advice before you propose a settlement agreement to your employer to ensure that this is the best option for you. If you are thinking of handing in your notice or are concerned that you may be dismissed, then it is important to be aware that you only have 3 months from your last working day to bring a claim in the Employment Tribunal. For this reason, if you are resigning make sure that you include the date of your last day in your resignation letter and diarise this deadline in case your employer delays the settlement agreement decision process.

Requesting a settlement agreement from your employer is not a decision that should be taken lightly and so obtaining legal advice before doing so will make sure that you are doing it correctly and are taking the right step forward for your own situation.

If you have any questions on requesting a settlement agreement or to find out more about how we can assist you, call us today on 023 8071 7717 or email employment@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.