A Settlement Agreement is a legally binding agreement in which the employee agrees to settle statutory and contractual claims, usually in exchange for a settlement payment. Settlement Agreements are commonly used when an employer offers an employee an enhanced termination or redundancy payment, or to settle a potential dispute.
What are the requirements for a binding settlement agreement?
It must contain certain information required by statute and the employee must have independent legal advice, usually from a solicitor. The claims that are settled need to be identified in the settlement agreement.
What are the usual terms of a settlement agreement?
Each agreement should be tailored to the particular employee. Generally speaking most agreements will contain clauses dealing with the following:
- Waiver / Settlement;
- Claims not to be settled (if any);
- Payments due up to Termination Date;
- Termination Date;
- Non-derogatory comments;
- Return of Company Property;
- Tax and Tax indemnity;
- Warranties Clause;
- Legal Advice and Certificate of Advice;
- References to be given.
Other clauses will normally cover third parties (who can enforce), jurisdiction (where disputes on the agreement will be dealt with), entire agreement (that the settlement agreement is the entire agreement and supersedes all prior discussions and agreements).