Back to basics – Employment Law Series – Settlement Agreements

We have put together a 5-part series of blogs in which we will explore the basics and fundamentals of employment law. Today’s focus is settlement agreements.

It is critical for all HR officials and businesses to have a sound foundation in employment law so as to limit risk and avoid disputes …so let’s get the basics right!

Settlement Agreements – the basics you need to know

In this part of blog, we will focus on the statutory requirements that must be satisfied in relation to a settlement agreement, including the requirement for independent legal advice and what this means.

For a settlement agreement to be valid, certain must be met:

• The agreement must be in writing.
• The agreement must relate to a "particular complaint" or "particular proceedings".
• The employee must have received legal advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on the employee's ability to pursue any rights before an employment tribunal.
• The independent adviser must have a current contract of insurance, or professional indemnity insurance, covering the risk of a claim against them by the employee in respect of the advice.
• The agreement must identify the adviser.
• The agreement must state that the conditions regulating settlement agreements under the relevant statutory provisions have been satisfied.

If an agreement fails to comply with any of the requirements, it will be invalid. This is so even if the failure is seemingly only technical.

Independent legal advice

For a settlement agreement to be effective, the employee must have received independent legal advice on the effect of the agreement.

In the case of Allison v University Hospitals of Morecambe Bay NHS Trust ET/2414619/18, an employment tribunal decided that an agreement was invalid because the claimant did not in fact receive independent legal advice, despite the signed agreement and adviser's certificate stating otherwise.

The independent adviser must advise the employee on the terms and effect of the settlement agreement, in particular its effect on their ability to bring a tribunal claim under the relevant legislation.

The requirement for the employee to receive advice on the "terms and effects of the proposed agreement" does not require the relevant independent adviser to advise on whether the deal on offer is a good one or whether they think the employee should accept it.

Generic advice given by panel solicitors in group presentations to employees before individual meetings could form part of the "advice" given to each employee.

Contact hina@partnerslaw.co.uk if you are considering offering your employee a settlement agreement, or if you would like Hina to advise the effected employee of the terms and effect of the settlement agreement.