Does a Settlement Agreement Need to Be Signed by a Solicitor?

You have been handed a settlement agreement. It is several pages long, written in dense legal language, and your employer wants it signed quickly. Before you do anything, make sure you have all the facts.

Key points covered in this blog:

  • Why a solicitor must sign off on your settlement agreement
  • When settlement agreements are typically used
  • How to know if your compensation is fair
  • What post-termination restrictions mean for you
  • What payments are usually included
  • Whether your employer will cover your legal fees

The Short Answer: Yes, You Need a Solicitor

A settlement agreement is a legally binding contract. It cannot be signed off without independent legal advice from a qualified lawyer.

This is not optional. The Employment Rights Act 1996 makes it a legal requirement. Without it, the agreement is not valid and cannot be enforced.

Formerly known as compromise agreements, settlement agreements allow an employment contract to be terminated on mutually agreed terms. The employee waives their right to bring future claims to an employment tribunal. In return, they receive a financial payment and sometimes other agreed terms.

Once both parties are satisfied, your employment solicitor will certify the agreement. This confirms you have been properly advised of your rights.

Why Can’t You Just Sign A Settlement Agreement Yourself?

Settlement agreements are written in legalese. This is a form of legal language where words carry specific meanings that differ from everyday usage.

Without specialist knowledge, it is easy to miss the implications of what you are agreeing to. An employment solicitor ensures you understand exactly what you are waiving and whether the terms are fair.

Getting advice from a solicitor who specialises in settlement agreements protects you. It ensures you are not giving up rights you did not know you had.

When Are Settlement Agreements Used?

There are several situations where an employer may offer a settlement agreement.

Redundancy is the most common reason. An employer will often offer an enhanced payment to avoid a lengthy termination process. This can include performance reviews and lengthy consultation periods.

Other common reasons include:

  • Concerns about an employee’s performance or conduct
  • A breakdown in the working relationship
  • Discrimination or whistleblowing disputes
  • Mutual agreement to part ways

Whatever the reason, the terms of any agreement must be fair and properly documented.

Am I Being Offered Fair Compensation?

Wondering if you are being offered fair compensation is one of the most important questions your solicitor will help you answer.

They will review your agreement and compare the offer against the circumstances that led to it. An experienced employment solicitor will have a clear understanding of typical compensation levels for different situations.

They will also weigh the offer against the strength of any potential tribunal claim. If the amount is too low, they may recommend negotiating for more.

Most employees and employers want a quick resolution. But quick should never mean settling for less than you are entitled to. If the offer is not fair, we can negotiate on your behalf to secure a better outcome.

Post-Termination Restrictive Covenants

You may see a clause in your agreement referred to as a post-termination restrictive covenant or PTR.

These clauses place restrictions on what you can do after leaving your job. They might prevent you from:

  • Working for a direct competitor
  • Approaching your former employer’s clients
  • Poaching colleagues to join a new employer

Not all restrictive covenants are enforceable. If your employer has committed a serious breach of contract, the restrictions may not hold. Your solicitor will examine this carefully before you sign.

Agreed References

A settlement agreement can include an agreed reference. This is a written statement that your employer commits to providing to future employers.

It is worth negotiating this into your agreement. Your settlement agreement solicitor can also push for a clause preventing your employer from withdrawing or contradicting the reference at a later date.

Confidentiality Clauses

Most settlement agreements include a confidentiality clause. This prevents you from disclosing certain information to certain people.

The scope of confidentiality clauses can be broad. However, it is now standard practice for agreements to include a “family carve-out”. This allows you to discuss the matter with immediate family members, provided they also keep the information confidential.

Your solicitor will make sure you understand the full extent of the confidentiality obligations before you sign. Breaching a confidentiality clause can have serious consequences.

Will My Employer Pay My Legal Fees?

In most cases, yes. Employers typically contribute to your legal fees as part of the agreement.

For a straightforward settlement agreement, a contribution of between £300 and £500 is usually sufficient. More complex agreements, particularly those involving post-termination covenants or multiple claims, may attract a higher contribution of over £1,000.

What Payments Are Typically Included?

Settlement agreements can include several types of payment. Here is what to look out for:

Compensation: A payment of up to £30,000 can be made tax-free, provided it is not a contractual payment. Anything above this threshold will be subject to income tax.

Notice pay: If you are not required to work your notice period, you will receive a payment in lieu of notice. This is subject to tax and National Insurance contributions.

Loss of pension: In some cases, your employer may make a lump sum contribution to your pension as part of the settlement. This payment is typically tax-free.

Bonuses and commission: Any bonuses or commission you are owed should be clearly set out in the agreement. Your employment solicitor will check your employment contract to ensure you are receiving everything you are entitled to.

Benefits: If you receive benefits such as private medical insurance or life cover, check whether these continue until your last day of employment or until a later agreed date.

What Should You Do When You Receive a Settlement Agreement?

A settlement agreement can offer a clean and certain resolution to a difficult situation. But the terms must be right.

You should never sign a settlement agreement without taking independent legal advice first. Once signed, you cannot go back.

If you have been offered a settlement agreement and want to understand your options, we are here to help. Our specialist employment solicitors can review your agreement, advise on whether the offer is fair and negotiate improved terms where needed.

Speak to our employment solicitors today

FAQs

How long do I have to sign a settlement agreement? 

There is no fixed legal deadline to sign a settlement agreement. However, ACAS recommends that employees be given a minimum of 10 calendar days to consider an offer. Your employer cannot pressure you into signing immediately. If you need more time to take advice, you are entitled to ask for it.

Can I negotiate a settlement agreement? 

Yes, you can negotiate a settlement agreement. A settlement agreement is an offer, not a final decision. Your solicitor can negotiate on your behalf to improve the financial package, amend restrictive covenants or strengthen the reference clause. Many initial offers are successfully improved before signing.

What happens if I reject a settlement agreement? 

Rejecting a settlement agreement offer does not automatically mean you will be dismissed. However, your employer may proceed with a formal process such as redundancy or a performance review. Your settlement agreement solicitor can advise on the risks of rejecting an offer based on your specific circumstances.