Settlement Agreements

Settlement agreements (formally known as compromise agreements) can be a practical way to end an employment relationship. They are legally binding contracts whereby employees waive their right to bring an employment law claim against their employers on the basis of for instance, discrimination or unfair dismissal. For agreeing not to pursue a claim, employees will often receive a payment from their employers in return known as a settlement.

How do settlement agreements work?

Settlement agreements are most commonly used during redundancy and dismissal procedures, where the relationship between parties have turned sour and there is a possibility that the employee may have a claim to bring against the employer. If properly drafted they can be used to terminate employment in a way that suits all parties without the risk of an employment tribunal claim being made.

They can also be made after the employment has been terminated and before a matter reaches an Employment Tribunal Hearing. Any out of court settlement reached will be in the form of a settlement agreement. Tribunals are always open to parties settling and will stall a hearing that is listed to proceed on the day and allow parties time to try and broker a settlement.

Content and Terms

However, settlement agreements will only be binding if in writing and the employee has had legal advice from an independent legal advisor, who must be named in the document. If these conditions are not met but a payment has been made, the employee may still be able to bring a claim against their employer as well as keep the settlement. It is therefore essential to not only properly word an agreement but to also negotiate it skillfully.

Settlement Agreements are not straight forward documents as they have to be written in language that is legal and protects both parties. They can have contentious clauses such as employment restrictions and employers may insist on clauses that effectively ‘gag’ the employee so that the terms of settlement cannot be disclosed to a third party or published. Most agreements will include an agreed draft reference and this can sometimes be difficult to agree upon.

What can we do for you?

We can negotiate on behalf of you to settle a claim at any point of the claim. We have the experience to negotiate on favourable terms when acting for either party. In cases where the employer normally pays the legal fees of the employee, we will accept instructions and represent the employee without any extra charges. We also help negotiate the settlement figure based on the strength of the case against you so we may be able to secure more for the employee than what is offered.

However, settlement may not always be the best option and if the sum offered or demanded by the employee far exceeds the claim we may advise against settlement if the prospects of bringing a successful claim at an Employment Tribunal is better. We can, if instructed act for you, prepare the case and represent you at the Employment Tribunal whether you are the employee or an employer. 

Employment Lawyers, Canary Wharf, London

If you require specialist employment law advice across London or throughout the United Kingdom call 0203 540 6340 to speak to one of expert solicitors. Alternatively, please email us at or complete the form below.

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