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Settlement agreements – An employer’s best friend

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Settlement agreements – An employer’s best friend

A Settlement Agreement is a legally binding agreement between an employer and an employee that usually sees the employer provide a severance payment in return for the employee’s agreement not to pursue any potential claims against the employer - be they in respect of unfair dismissal, discrimination or breach of contract or any other claim arising out of the employment or termination of employment.

From an employer’s viewpoint the main benefit of a Settlement Agreement is that they are given the peace of mind that no claims will be pursued against them. The Agreement can also include a number of additional provisions, such as the return of company property, non-derogation clauses, restrictive covenants and confidentiality clauses to protect the employer’s business once the employee has left. For an employee they know that once the Agreement is signed by all parties the employer is legally obligated to pay them the sum outlined within.

Employers may not realise that Settlement Agreements can be used in a wide variety of situations, for example when faced with an employee performance or misconduct issues, or when faced with having to make redundancies. In such circumstances a Settlement Agreement is an extremely useful tool allowing for a clean break for both employee and employer. The use of a Settlement Agreement may also save substantial management time, as it may negate the need to conduct redundancy, disciplinary or capability processes, as once the employee signs the agreement they waive their right to make any claims for the employer’s failure to conduct such proceedings.

If you are an employer and do not use Settlement Agreements you are fortunate if you have not yet experienced any employment disputes, which can lead to long protracted litigation causing substantial costs and management time to be consumed. As an employer the next time a potential dispute or employment issue arises it is worth giving serious consideration to the use of a Settlement Agreement.

Please contact either Michael Scutt or Nicola Shepherd on 01707 387075 for more details.

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