Settlement Agreements: ensuring a MOORE favourable exit

If you are an employee and your employer has just mentioned a ‘settlement agreement’, you are probably wondering what is being offered and what you should do.

Previously known as ‘compromise agreements’, settlement agreements are also referred to as ‘golden goodbyes’, ‘gagging clauses’ and ‘termination agreements’. Legally speaking however, ‘settlement agreement’ is the correct term to use.

There are many reasons why your employer may offer you a settlement agreement. Most commonly settlement agreements are offered to end your employment on agreed terms. They can also be used in a redundancy situation or to resolve a dispute.

If your employer offers you a settlement agreement upon leaving your job, understanding the terms and deciding whether to accept them can be daunting. This is one of the reasons why it is a legal requirement that you obtain independent advice on the terms you are being offered so that you understand them fully before you sign the agreement.

What is a settlement agreement?
A settlement agreement will usually offer you a lump sum payment. In return you, as the employee, sign away your rights to ever bring claim against your employer. For example, if you have a claim against your employer under employment legislation – discrimination, for example – you cannot waive that claim without entering into a formal settlement agreement that fulfils strict statutory requirements.

Essentially, a settlement agreement means that you agree not to bring an employment law claim against your employer. In return you receive appropriate compensation. Most commonly this is a financial payment, though other benefits can be offered too.

Why have I been asked to enter into a settlement agreement?
Your employer may ask you to enter into a settlement agreement because they are concerned you may have a claim against their business. Equally, they may do this as routine when an employee leaves the business and is being paid an ex gratia amount. Settlement agreements aren’t just used when you leave the business, they can also be raised during your employment if you have a valid grievance that the business may want to settle and keep confidential.

What are the advantages of entering into a settlement agreement?
As well as the potential financial advantages, as part of your settlement agreement your employer could agree to provide you with a reference – something an employment tribunal cannot do. Interestingly, an employment tribunal can’t request a company apologise to an employee. You can however ask your employer to apologise as part of a settlement agreement.

Legal advice is paramount
Due to the complex nature of settlement agreements it is important that you instruct a specialised employment lawyer who can take you through the agreement comprehensively and explain the implications of signing it so that you are fully satisfied that you are receiving the best possible deal.

We at Moore Blatch can advise you on what potential claims may have arisen in the course of your employment and the value of your claims so that you can properly weigh up the offer on the table.

Our team has vast experience in advising on and negotiating the terms of settlement agreements across all industry sectors. We will negotiate robustly and sensitively on your behalf, advising creatively and meaningfully on the best angle to take. We will ensure that you walk away with the best package possible and achieve the best possible outcome for you.

If you have any queries, please don’t hesitate to get in touch. For more information, please contact Naomi Greenwood on 020 3274 1006 or email