Why a Settlement Agreement

Is it right for my case?

Why a Settlement Agreement 2019-06-25T13:13:49+01:00

You might think you have a cast-iron employment claim against your employer, and you might well be right. But have you considered that there might be a better way of approaching the situation?

The chances are good that, as an employee or a recently-fired employee, the benefits of settling your dispute early through ACAS Early Conciliation or a Settlement Agreement could outweigh those of pursuing an employment tribunal claim.

There can be lots of reasons why a Settlement Agreement is better for you: each case is individual and has to be looked at on its own merits. We’ve listed six of the most common advantages of Settlement Agreements below:

1. A Settlement Agreement usually provides a quick, clean break

An employment relationship is a little like a marriage: after all, people often spend longer at work than they do with their partner! When an employment relationship breaks down, it can be like the end of a marriage: there can be fireworks. A Settlement Agreement goes a long way to avoiding the drama, allowing for a quick parting of the ways and leaving both employee and employer free to move on to other things. Employment Tribunal claims often take a very long time, and they are invariably very stressful, even for the most robust of claimants!

2. A Settlement Agreement will cost you nothing, or very little

It is normal for an employer to contribute towards the legal costs incurred by an employee’s (or former employee’s) seeking legal advice on a Settlement Agreement. And, of course, if you use a solicitor, you may have to pay their fees, too (unless you have trade union funding, or legal expenses funding, or a ‘no win, no fee’ agreement). As you cannot usually recover your legal costs in an employment tribunal, those costs might devour your compensation, leaving you with little, or even leaving you in debt. And, should you lose the tribunal claim, you will be in an even worse financial position – on top of the other negative effects of that experience.

3. A Settlement Agreement usually includes a reference

Even if an employment tribunal found that you had been unfairly dismissed, or even discriminated against by your horrible boss, the judge does not have the power to order the employer to prepare a good reference. Often, a good reference can be worth thousands of pounds to an employee who couldn’t get a new job without one. There is no obligation on a former employer to give a reference, and so ensuring – as part of a Settlement Agreement – an agreed reference is usually a smart move.

4. Settlement Agreements are usually confidential

Unlike a tribunal order, which is a public document, a Settlement Agreement usually states that neither party can refer in public to the existence of the Settlement Agreement. Confidentiality clauses usually help both parties to move on, and to make a fresh start.

5. The potential value of a tribunal claim will be significantly reduced if you find a job

If you’re claiming compensation for loss of earnings, you are only entitled to be compensated for your actual financial losses. If you find a new job very quickly, your compensation will be much lower than if you’re out of work a long time. And if you move into a higher paying job, there could be no loss of earnings claim at all. In contrast, the sum paid to an employee in a Settlement Agreement is normally based on how long they’re likely to be without a job. So if you find a job sooner, it’s a bonus: no need to pay back the compensation!

6. Employers don’t want to employ litigious employees

Not only are prospective employers reluctant to employ someone who was sacked from their last job (even if unfairly), but they are even less likely to employ you if they find out that you are suing your former employer. The reality is that this would likely be too many red flags for a potential employer. A Settlement Agreement can often be used to end an employment relationship without there needing to be a finding of gross misconduct: allowing an employee to move into another job much more smoothly and quickly.

Signing a Settlement Agreement isn’t the right thing to do in every case, but it is an option many employees should consider. Truth Legal are here to help you at every stage of the process, from your first free, no-obligation consultation with one of our experienced solicitors right through to a time when you are able to put the whole affair behind you. Contact us today in confidence.