Settlement Agreements – DAY 2 of 3 – The Draft Settlement Agreement
Following on from the ‘without prejudice’ meeting with Bob, you need to provide him with a draft settlement agreement in order for him to obtain legal advice. However, can you draft a good Settlement Agreement on behalf of the company? Remember that the terms of the agreement should protect the company, however, they are negotiable!
As mentioned previously, Settlement Agreements are very useful tools to an employer. They effectively draw a line under the employment relationship and therefore provide comfort to you that your employee will not bring any employment related claims against you.
In short, a Settlement Agreement is a full and final settlement of any claims which the employee is aware of or may become aware of in the future. It also sets out what the employee can and cannot do after termination of his/her employment.
Here are some tips of clauses to consider including in the Settlement Agreement:
Yes you will have your standard clauses such as confidentiality, non-derogatory statements and tax indemnity, but it is also an effective way of ensuring that your employee is compensated for termination of their employment preventing them from bringing an employment claim. This saves you a lot of time, money and stress as you do not have to defend a claim in an Employment Tribunal.
As well as these standard clauses, there are other things as well as financial ones, that you can use to encourage the employee to enter into a Settlement Agreement.
Some of the things we often see are:
- An agreed reference – this is great for employees, but remember your obligations to ensure that it is true and fair.
- Continuation of employee benefits post-termination, i.e. healthcare and car allowance.
- Outplacement services.
- Payment in Lieu of Notice – great for employers AND employees as the employee does not need to work through there notice period. In some circumstances you can ensure the tax status is protected, by making the payment a “damages payment;”
Here are some common errors we come across when a settlement Agreement lands on our desk:
- No plan of when payment(s) will be made – the Settlement Agreement needs to clear about what will be paid to your employee and when.
- Contractual and non-contractual payments are combined – this can affect the tax status of the ex gratia payment so needs to be expressly separated in the agreement.
- Accrued holidays – outline the number of days and the actual payment due to avoid uncertainty.
- Mutuality of obligation – an employee is more likely to sign the agreement if they agree to keep the agreement confidential and not make derogatory comments and you agree to do the same.
- It is always important to consider the time period for deferred termination dates – ask the employee to re-sign the Settlement Agreement before their termination date and deal with what will happen in the event that the employee commits an act of gross misconduct before the termination date.
Employers need to remember that there is never a ‘standard’ Settlement Agreements and they are not easy documents to produce. Although you may have been using the same document for a number of years and the document has never been challenged it is important to remember that laws and best practice change over time, and one size never fits all!
It is vital to make sure you draft the agreement correctly and is valid as this could make a difference between no claim or an expensive Tribunal claim. The purpose of the agreement is to protect you, the employer, so making sure that you take the time to ensure that it is properly drafted and relevant to those individual circumstances.
You have now drafted the settlement agreement and provide a copy to Bob. In order for a Settlement Agreement to be legally binding, Bob will be required to take independent legal advice before they sign the agreement. Stay tuned to find out whether Bob will sign the agreement?
If you would like some advice on drafting a Settlement Agreement please contact email@example.com.
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Very useful, thank you – more time neededHR Administrator attendee
“I would like to acknowledge and appreciate the role that Partners Employment Lawyers and in particular Remziye Ozcan, played in securing a Settlement Agreement with my former employer.
Remziye was very helpful in clarifying my legal position in the debate with my employer over redeployment vs. retirement vs. redundancy. Even though we work on opposite sides of the world and in different time zones, she always responded to my queries, quickly absorbed the volumes of data on company policy and procedures which I sent her and promptly provided me sound practical advice to help achieve my objective. The whole tone of the conversation changed when my employer recognized that I had engaged professional outside help and there is no doubt in my mind that without the intervention of Partners Employment Lawyers, the debate would have been more protracted and likely more contentious.
Their charges were very reasonable and in any event the cost is more than covered by the outcome. I would have no hesitation in recommending Partners Employment Lawyers to any employee who found him or herself in a similar position.”Individual Client
Since Hina’s training day we have reduced absences by 60%Mark Jackson, Seebord
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Hina and Remziye recently delivered employment law sessions to our London management team which focused on a range of key employment law issues. Feedback was that the sessions were excellent, informative and well presented. They discussed not only actual case law but also advised on company-relevant scenarios, based on their knowledge of our internal policies and procedures.
HR Department, Euromonitor International Ltd.
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I do not believe that we would have been able to resolve this matter without your involvement as legal advisor.
Great work and successful outcome.”
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I was particularly impressed by you and your team as all of you communicated your respective knowledgeable and experience in a pragmatic way, which, in my personal experience is not always the case. I have attended other legal firm’s seminars and although the content is usually good it is frequently presented using too much ‘lawyer speak’, often assuming the very worst outcome including extreme escalated litigation, which for the majority of cases is not the most likely outcome. I realise that we as HR practitioners, need to be aware of worst case scenarios but sometimes there is too much emphasis on this. “Suzanne Prince, HR Contractor
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A special thanks to Hina Belitz for her interesting talk on what we must take into account before employing someone at any level. She carried us through what could be a “heavy weight” topic with such ease that we could have listened to her for hours!Marilena Narbona – The Athena Network
Thank you for all your great work on the tribunal. I am pleased with the outcome and continue to hold my breath and hope that XXX can move on.Chief Executive of City Company
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Employment Law Seminar 18th June 2014 – A very interesting session with good speakers covering a range of topicsJulie Fisher-Jones, Parliamentary & Health Service Ombudsman
“I would like to thank you for the way in which you handled my employment matters. The whole team at Partners were at all times professional, compassionate and kept me fully informed at every stage in particular Remziye helped me through a situation that I found very difficult and stressful and I cannot thank her enough, I would highly recommend Partners Services.”Individual Client
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I could not have hoped for better assistance and expertise in resolving the recent issue around my employment than I received from Partners Employment Lawyers.
In a very stressful and unfamiliar situation for me, I was extremely grateful that Partners Employment Lawyers understood my situation quickly and perceptively, and then worked hard to secure for me the outcome that I desired.
The firm displayed a level of professionalism and sensitivity to my personal situation that I appreciated and will not forget.
At all times the lawyers were mindful of the result I desired. As the matter progressed they explained to me clearly and in balanced terms the likelihood of achieving that outcome.
I appreciated Partners Employment Lawyers also giving me thoughtful advice on other, broader points relevant to my future employment, which I now understand it was important to make clear as part of a successful outcome. Without reminding me of these, my longer-term interests, I could easily have thought about only the immediate problem at hand, which I now see would have been ultimately to my detriment.
Partners Employment Lawyers spoke with me from a more holistic perspective on my employment future than I was able to take, which this was an immense benefit to me. Giving me a calm and encompassing perspective at such moments was, itself, an immense relief to me, as was simply having someone on my side.Individual Client
“I was extremely pleased with how Remziye handled my case, a difficult and delicate dispute with my employers. I found her to be professional, courteous and understanding of my situation. My case got resolved very quickly with the end-result exceeding my expectations.
I am very grateful to Remziye for all her help and would not hesitate to recommend Remziye to my friends and family.”Individual Client
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Thank you so much for all your help and advice. It was nice dealing with someone who honestly caredKylea Jarrold
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A short note to say I found you and all my dealings with the company highly professional; it was a pleasure ( under the circumstances) doing business with you. You took care to listen to the detail of the case, take it on board, build a relationship with me and the aggressor , and come to a final and acceptable agreement swiftly.Individual client
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Employment Law Seminar 6th March 2014 – The two lady speakers were great. It was really helpful having questions from the floor and they both provided really helpful case studies of the recent cases they worked on. Overall to cram all that information in just two hours, it was a good event and would like to attend more!Chetna Kerai, NatCen Social Research