Settlement Agreement Advice for Employers

Settlement agreements are a well-established way for employers to bring an employment relationship to an end while limiting the risk of future legal claims. Used correctly, they provide certainty, confidentiality and a clean break. Used incorrectly, they can leave an employer exposed to employment tribunal claims and costly legal proceedings.

The settlement agreement solicitors at Clough & Willis advise employers on the preparation, negotiation and completion of settlement agreements across a wide range of employment situations. We make sure agreements are legally valid, appropriately drafted and tailored to the specific circumstances, to protect your business from unnecessary risk.

To discuss a settlement agreement or ongoing employment issue with an expert employment law solicitor, contact Clough & Willis on 0800 083 0815 or complete our online enquiry form.

How Can Clough & Willis Help?

Clough & Willis provides specialist employment law advice to employers who are considering offering a settlement agreement or responding to negotiations raised by an employee. Our role is to protect your business interests while making sure the agreement complies fully with employment law requirements.

Our settlement agreement solicitors advise on drafting settlement agreements, assessing potential employment tribunal claims and managing negotiations in a way that reduces the risk of escalation. We also advise on timing, approach and wording, which can make a significant difference to enforceability and outcome.

Where negotiations are required, we act on your behalf to reach an agreement efficiently, helping you achieve certainty while controlling legal fees and minimising disruption to your business.

Why Settlement Agreements Require Careful Legal Handling

As a legally binding contract that prevents an employee from bringing legal claims against their employer, including claims for unfair dismissal, discrimination or breach of contract, a settlement agreement must be handled with a careful eye for the legal details around this area of law.

For the settlement to be legally valid, the employee must receive independent legal advice from a qualified lawyer, and the agreement must correctly identify the claims being waived. If these requirements are not satisfied, the agreement may not be enforceable.

Employers who attempt to use generic or poorly drafted agreements risk leaving gaps that allow employees to pursue legal action later. Involving a solicitor with experience in employment law, such as the team at Clough and Willis, means that the agreement is legally robust and able to provide employers with the protection it is intended to deliver.

When Settlement Agreements are Commonly Used by Employers

Settlement agreements are often used where there is an underlying employment issue or risk of dispute. Common situations include redundancy discussions, performance concerns, workplace disputes or circumstances where an employer wishes to avoid a potential employment tribunal claim.

They are also useful where relationships have broken down, or where both parties would benefit from a managed and confidential exit rather than formal legal proceedings. Our team will take the time to understand your motivations for seeking settlement, alongside your exposure to the employee's potential claims, to make sure we draft an effective and clear agreement.

Independent Legal Advice and Legal Validity

For a settlement agreement to be legally binding, the employee must receive independent legal advice from a qualified lawyer. This is a legal requirement and cannot be waived. The solicitor advising the employee must confirm that the agreement meets the statutory requirements.

Most employers contribute towards the employee’s legal fees, and this contribution is usually specified within the agreement. A solicitor can advise on appropriate fee contributions and make sure this aspect is handled correctly. This outlay vastly reduces the risk of the agreement being challenged later.

What is a Reasonable Settlement Agreement for an Employer?

There is no single definition of a reasonable settlement agreement. From an employer’s perspective, reasonableness depends on the strength of any potential employment tribunal claim, the employee’s length of service, contractual entitlements and the commercial value of achieving a swift resolution.

A financial settlement may include notice pay, holiday pay, contractual payments and an ex gratia payment. Some elements may be paid tax free within permitted limits. Employers must balance the cost of settlement against the risk, time and expense of defending legal proceedings.

Our solicitors can advise on whether a settlement offer is proportionate to the risk involved and whether adjustments are likely to be required to reach agreement.

Negotiating a Settlement Agreement

Negotiating settlement agreements requires careful handling. Poorly managed discussions can increase risk, damage working relationships or undermine the protection a settlement agreement is intended to provide.

Clough & Willis advise employers on negotiating settlement agreements in a controlled and strategic way. This includes managing correspondence, responding to counter-offers and maintaining a strong negotiating position without escalating the dispute unnecessarily.

Attempting to negotiate directly without legal advice can result in unintended admissions or procedural errors. Before you take any action towards offering a settlement to an employee, you should get in touch with our team.

Non-Financial Terms and Ongoing Protection

Settlement agreements often include important non-financial terms that protect the employer beyond the end of the employment relationship. These may include confidentiality clauses, restrictive covenants, post-termination restrictions and provisions relating to trade secrets.

Agreed references, confidentiality obligations and the handling of company property should also be carefully addressed. A solicitor will work with you to make sure these terms are enforceable, proportionate and appropriate to the role and circumstances.

These provisions can be as important as the financial settlement for protecting your business long term, particularly when disputes involve high-level staff that may have the knowledge, relationships and inside knowledge to compete with your business.

How Clough & Willis Supports Employers

Clough & Willis has extensive experience advising employers on settlement agreements across a wide range of employment situations. Our employment law team provides practical, commercially focused advice designed to protect your business and achieve certainty.

We offer a courteous, professional service and a long track record of supporting employers through sensitive employment negotiations. Our advice reflects the specific circumstances of your business and the risks involved, allowing you to make informed decisions at every stage.

Our wider employment law and HR services experience covers a wide range of issues, including:

• Discrimination
• Dismissal Procedures
• Employee Benefits and Incentive Packages
• Employer's Advantage - Managed HR Solutions
• Employment Contracts & Service Agreements
• Employment Tribunals
• Redundancies
• Restrictive Covenants
• Settlement Agreements
• Sexual Harassment
• TUPE and Business Re-organisations
• Core Protection From Clough & Willis

Clough & Willis allows you to meet your legal responsibilities to members of your staff under all circumstances, and significantly reduces the risk of a costly and disruptive employment tribunal claim.

FAQs About Settlement Agreements

Do settlement agreements prevent employment tribunal claims?

When properly drafted and completed by a solicitor that specialises in employment law, a settlement agreement will prevent the employee from bringing an employment tribunal claim relating to the matters covered by the agreement.

Is an employer required to offer a settlement agreement?

Settlement agreements are voluntary, but they are often used where an employer wishes to manage risk and avoid legal proceedings.

Can settlement agreements be negotiated?

Settlement agreements are commonly negotiated, particularly where potential claims exist. This process will commonly be handled through both parties' solicitors before the contract is finalised.

What happens if the employee refuses to sign?

If an employee refuses to sign, the employer may need to consider alternative options, including continuing the employment relationship or pursuing formal procedures. Legal advice will give you full visibility of all your options and potential outcomes, so you can assess the risks of each approach.