Importance of Drafting a Correct Settlement Agreement
A settlement agreement is a legally binding contract between an employer and an employee. It resolves a workplace dispute or terminates the employment relationship on agreed terms.
Drafting a settlement agreement correctly is essential to ensure it is legally enforceable and protects the interests of both parties. A poorly written agreement may fail to waive an individual’s rights to pursue a claim in court or an employment tribunal.
Why Templates May Not Work
Using a generic template is not enough. Every settlement agreement should be tailored to the specific circumstances of the individual. This ensures it meets legal standards and remains enforceable. Seek advice from experienced settlement agreement solicitors if you are unsure.
How to Write a Settlement Agreement:
Writing a settlement agreement requires careful consideration to ensure all essential terms are included and legally enforceable including:
Payment Terms: The agreement should clearly outline payments to be made to the individual and when those payments are due.
Reason for Termination: Include the reason for the termination, the termination date and any holiday pay owed to the employee.
Waiver Clause: A standard settlement agreement should have a detailed waiver clause. This clause lists all claims the individual agrees to waive.
Confidentiality Clause: The agreement should include a confidentiality undertaking. This ensures all parties keep the circumstances surrounding the agreement private.
Non-Derogatory Undertakings: A non-derogatory undertaking clause should prevent both parties from badmouthing each other. Include terms for references and announcements about the employee’s departure.
Legal essentials: To be legally valid, a settlement agreement must be in writing, involve an independent legal advisor and comply with statutory rules.
Benefits of a Well-Drafted Settlement Agreement
A well-drafted settlement agreement provides numerous advantages for both parties. It saves time by avoiding lengthy legal disputes and ensures clarity by clearly outlining the terms of the agreement. Additionally, it protects both the employer’s and the employee’s interests by reducing the risk of misunderstandings or future claims. Resolving disputes amicably helps maintain professionalism and minimises stress for everyone involved.
Seek Settlement Agreement Legal Advice
We strongly recommend employers seek settlement agreement legal advice when drafting an agreement. Legal experts can ensure the agreement is tailored to the employee’s exit and complies with legal requirements. Contact us for expert settlement agreement drafting.
With over 10 years of experience in employment law matters, David Philip Harris specialises in providing legal advice on settlement agreements to both employees and employers throughout the UK. David’s opinion and advice are frequently sought after as he contributes often to BBC Radio Berkshire and the People Management Magazine. David Is a long-standing member of The Employment Lawyers Association and The Law Society.
