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Settlement Agreements - Did you know…

29 January 2020

Did you know for a settlement agreement to be binding and valid certain statutory requirements must be satisfied?

For a settlement agreement to be valid, certain conditions 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.

In the case of Palihakkara v British Telecommunications Plc UKEAT/0185/06, the EAT decided that a compromise agreement did not settle claims under the Sex Discrimination Act 1975 or the Race Relations Act 1976 because it did not expressly state that the conditions regulating agreements under those statutes had been satisfied. It did state that the conditions under the Employment Rights Act 1996 had been satisfied, but this was not sufficient. The EAT stated "the absence of a clause confirming that the conditions in these discrimination statutes are satisfied is fatal … the statutes are plain and require a condition."

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