My employer has given me a Settlement Agreement – what is it and what should I do?

My employer has given me a Settlement Agreement – what is it and what should I do?

4th June 2019

Settlement Agreements are often offered by an employer to an employee, without any prior warning. If you are the employee in question, this can leave you wondering about the implications and your next steps.

Settlement Agreements are agreements which can be used to waive employment claims which you may have against your employer. Usually this will involve the termination of your employment and a sum of money paid to you to settle (give up) your employment claims.

What terms are there in a Settlement Agreement?

 In addition to written terms about the settlement of claims and monies payable, the Settlement Agreement is also likely to include other terms e.g. you and the employer promise to keep the Agreement confidential and to refrain from making derogatory comments about each other.

Usually, a reference will be included within the terms of the Settlement Agreement which your employer will agree to provide if a reference request is made by a future employer.

Do I need to take legal advice?

You will be required to take independent legal advice about the terms of the Settlement Agreement in order to validly settle your statutory employment claims.  It is usual for your employer to pay a contribution towards your legal costs for taking this advice. We can advise you on the terms of the Settlement Agreement.

Can I negotiate on the terms of the Settlement Agreement?

You should be aware that you do not necessarily need to agree to the terms which are initially offered to you and sometimes your employer will be prepared to negotiate on the terms. You may prefer that we carry out such negotiations.

Once a valid Settlement Agreement has been signed, you will not be able to sue your employer for any claims referred to as settled in the Settlement Agreement.


What are the benefits of entering into a Settlement Agreement?

Entering into a Settlement Agreement can result in a more satisfactory result than pursuing your claims in an Employment Tribunal as concluding a Settlement Agreement will give you a quicker and certain outcome.


What happens if a Settlement Agreement is not concluded?

Any discussion or correspondence about ending your employment on agreed terms should ideally be stated as being a “Confidential Discussion under Section 111A Employment Rights Act 1996”.

If you and your employer are unable to agree the terms of a Settlement Agreement, the Settlement offer and discussions cannot usually be referred to as evidence in any subsequent unfair dismissal claim but can be referred to in other claims. However, if there is already an existing dispute between you and your employer, any such settlement discussions are likely to be covered by the “without prejudice” rule which means that they could not be revealed in any claims, whether unfair dismissal or otherwise.

If you are offered a Settlement Agreement or would like to start a discussion with your employer about an exit from your employment linked to a Settlement Agreement, please contact our Employment Solicitor, Kerry Hudson on 024 7653 1532 or email at

The above is not intended to provide advice.

Kerry Hudson is an employment solicitor in Coventry at Brindley Twist Tafft & James. She specialises in Employment Law and is a trusted advisor to both employers and employees.