Can a Settlement Agreement Be Withdrawn?

We are often asked by our clients whether or not it is possible for an employer to withdraw the offer of a settlement agreement after it has been made. Strictly speaking, the answer is it depends on the process which has been followed by the employer in making the offer of a settlement agreement.

Off-the-record conversation


Normally an employer offers a settlement agreement during what is known as a protected conversation. In this case, the conversation is had without prejudice or off the record, which means that it cannot be held against the employer during future litigation.


However, in order for a conversation to be protected in this way, an employer needs to follow certain guidelines in relation to the conduct of that conversation. By way of example, if the employer acts in “bad faith” during the conversation with the employee, it may be possible for the employee to argue that the conversation is no longer protected and, as such, it may be referred to in court or tribunal proceedings.


A conversation may be regarded as being in bad faith if the employer has put undue pressure on the individual to accept an offer detailed within a settlement agreement. For example, if the employer has said to the employee that they need to accept the settlement agreement failing which they will be dismissed then this is likely to be regarded as bad faith and therefore, the conversation is one which could be used against the employer concerned.


In other cases, if the claim which has arisen tied to a protected conversation is discrimination, then it may be possible to refer to the content of a protected conversation if to do so would support the argument that the employer was seeking to dismiss the individual for discriminatory reasons.


If an employer makes an offer of a settlement agreement, they will often do so subject to a time limit for the employee to accept that offer. The employee must take formal legal advice on the terms of the settlement agreement and ensure that a signed and certified copy of the settlement agreement is returned to the employer prior to the specified deadline, in order to form a binding contract.


The employer will often have to follow a formal process with a view to terminating the employee’s employment alongside the offer of a settlement agreement and as such, the offer of a settlement agreement cannot be open-ended.

Seek legal advice


The individual considering a settlement agreement should take advice from their solicitor about whether or not the agreement should be entered into within the deadline or alternatively, whether the individual should attempt to negotiate different terms under the settlement agreement before signing.


Therefore, in most cases, it will be possible for an employer to withdraw the offer of a settlement agreement if this offer has been made during a protected or off-the-record conversation or via without-prejudice correspondence.


However, the employee should be reassured by the fact the employer has made an offer in the first place because this is a strong indicator that the employer’s preference is to arrive at an amicable conclusion to any dispute which has arisen.


As such, if an employee requires additional time to consider a settlement agreement, then ordinarily, an employer will allow this rather than withdraw the offer of a settlement agreement altogether.