A settlement agreement is most commonly used to bring an employee’s employment to an end. However, that is not always the case, and understanding the difference matters.
The Most Common Use: Ending Employment
In the majority of cases, a settlement agreement marks the end of the employment relationship. This might follow a resignation, a redundancy process or another reason for termination. Because employment is ending, the agreement will typically include the employee’s contractual notice entitlement. This will either be worked or paid in lieu.
If you have received a settlement agreement, you are required by law to take independent legal advice before signing. A specialist solicitor can advise you on whether the terms are fair and whether there is scope to negotiate.
When a Settlement Agreement Does Not End Employment
In some circumstances, a settlement agreement is used without terminating employment. This is less common, but it is a recognised and valid use of the agreement.
Settling an Existing Claim While Remaining Employed
This situation arises where an employee has an existing legal claim against their employer, but both parties want the employment relationship to continue. Rather than going to an employment tribunal, the employer uses a settlement agreement to resolve the claim on agreed terms.
Discrimination Claims as an Example
A common example is where an employee has suffered discrimination and has a claim for injury to feelings or financial loss arising from that treatment. The employer may wish to compensate the employee properly. They want to draw a line under the matter without bringing the employment to an end.
In this case, the settlement agreement resolves the claim. The employee receives compensation. And crucially, their employment continues after the agreement is signed.
Speak to a Settlement Agreement Solicitor Today
Whether your agreement ends your employment or resolves an ongoing claim, getting the right advice before you sign is essential. Our specialist settlement agreement solicitors are available the same day. In most cases, your employer pays our fees in full. There is no cost to you and no obligation to proceed.
Get specialist settlement agreement advice today
FAQs
Can I negotiate the terms of a settlement agreement even if my employment is continuing?
Yes. A settlement agreement used to resolve a claim during employment is still a negotiated document. You are not obliged to accept the first offer your employer puts forward. Our specialist settlement agreement solicitor can advise you on whether the compensation offered properly reflects the losses you have suffered. This includes any award for injury to feelings, and what a reasonable settlement would look like in your circumstances.
What happens if I sign a settlement agreement without taking legal advice?
If you sign a settlement agreement without taking legal advice, it will not be legally valid. For a settlement agreement to be binding, you must have received independent advice from a qualified solicitor, trade union representative or certified adviser before signing. This is a statutory requirement, not a formality. If you sign without that advice, you may still be able to bring claims against your employer as though the agreement does not exist.
Does a settlement agreement prevent me from making any future claims against my employer?
It depends on the scope of the agreement whether you can make any future claims against your employer. Most settlement agreements include a list of specific claims that are being waived. You can only give up claims that are explicitly listed.
If your employment is continuing after signing, it is particularly important to check which claims are covered, as you will still be working for the same employer. A specialist solicitor will review the waiver clauses carefully and make sure you are not signing away more than you intend to.
