A Settlement Agreement is a legally binding contract that can be used to bring an employment dispute between an employer and an employee to an end without an Employment Tribunal decision. As an employee, there are a number of advantages to accepting a Settlement Agreement. However, you might be wondering what the employer will get out of it, so we’ve put ourselves in the mind of Mr or Mrs Employer to explore the reasons why a Settlement Agreement would be good for them.

They recognise weaknesses in their case

Don’t get too excited about this – it’s rare that an employer will put their hands up and say they got it wrong – but litigation is inherently risky and there will be strengths and weaknesses in any claim. A good deal of employment litigation turns on the credibility and strength of the witnesses, and your employer may recognise that there is a ‘weak link’ in the witnesses they will need to call. It’s also possible that relevant witnesses will have left the business by the time of the Tribunal hearing, and are not prepared to come and give evidence for the former employer. Another factor could be that the employer feels that they have done the right thing, but this isn’t backed up with relevant paperwork – policies, contemporaneous notes of what happened, training records, email trails – that would support this.

settlement agreement

Management time is money

If you are finding your Employment Tribunal claim time consuming, your employer is probably finding it so ten-fold. They will be searching for notes and documents, meeting with managers, with the HR team, and with their lawyers to discuss the case and understand what has gone wrong. Interviewing and preparing witnesses takes time – and as we all know only too well, time is money. A sensible employer will also want to establish what has gone wrong and learn from it. Settling the claim will give the employer more time and resources to make adjustments and prevent the same happening again. We hope.

If an employer is offering a Settlement Agreement to cover the termination of your employment, chances are they are looking to avoid a lengthy performance or capability management process – but this doesn’t mean they would be liable at the end of that process. The Settlement Agreement allows them to conclude matters more quickly – and will allow you both to move on.

The PR game

In this age of brand image, and of lists of ‘100 Best Employers’, the negative PR implications of defending a claim may outweigh the benefits of fighting it in the Employment Tribunal – even if the employer believes he has done nothing wrong. Talking to a former lawyer who used to act for large employers, it’s clear that this was always a consideration. Her experience was that the press would always report negatively about the employer in the run up to a tribunal, slate the employer if they lost the claim, but never report if the employer successfully defended the claim. And that was a few years ago – without the all-pervasive presence of social media. In the face of this, you can understand that a confidential Settlement Agreement which concludes matters swiftly, is preferable to playing a PR game you are quite likely to lose, regardless of the strengths or weaknesses of the case.

Protection of other employees

Rather paternalistic, this, if not to say patronising, but some employers take the view that they don’t wish to expose their remaining employees to cross examination in an Employment Tribunal. In the aftermath of events that have led to the point where a Tribunal claim is on the cards, the employer has to make a number of decisions, including to what extent they are corporately responsible for what happened. Occasionally, there are extreme cases where a protagonist has acted completely contrary to everything the employer has put in place. He or she might have blatantly failed to follow a process, or behaved in an overtly discriminatory way, despite training and instruction to the contrary. The employer might, in that case, choose to dissociate itself from the perpetrator of the unlawful behaviour and fight the claim on the basis that the individual was ‘on a frolic of his own’. In most cases, though, it’s harder to separate the behaviour of managers as individuals from the behaviour of the business. If one of the managers/employees who is key to the employer’s defence is vulnerable in some way, the employer may decide that it’s more responsible to try and settle rather than expose him or her to the stress of a tribunal.

In some cases, a Settlement Agreement isn’t right – either for the employer or for you as the employee – but if an offer to settle is made in good faith by your employer, it is always worth considering seriously as it can also save you the stress and expense of a Tribunal hearing, giving you closure and allowing you to move on with the next chapter of your life.

My name is Navya Shekhar and I specialise in negotiating the right Settlement Agreement for you. Call or email to arrange a no-obligation consultation with me.