What is a settlement agreement?
The basics: Hiring is a key part of running a business, and while it promises a lot of reward, it can also provide complexity. While the goal is to avoid any sour relationships, invariably in a company’s lifecycle disputes will arise. Depending on the nature of the dispute, there may be instances where an employee has a legal right to bring a claim against the business. This is a potential risk that any company would be wise to mitigate. A settlement agreement allows an employer to settle a dispute while protecting the business from legal risk.
When to use: A settlement agreement is used when there is a dispute between an employer and employee, and the employee agrees to waive (whether that’s to give up or agree not to use) their legal right to bring a claim against their employer in return for a lump-sum payment. This is often (but not always) used when the employee has been dismissed or is going to be dismissed.
Benefits of agreeing: The settlement agreement has many benefits for both the employer and employee. It offers certainty, reassurance and closure, rather than having to wait for an employment tribunal case or a court case to conclude. It also increases control as both parties agree to the certain and written terms of a settlement agreement, rather than having the uncertainty of an employment tribunal decision or a court decision. In the best case, agreement can be used to not only resolve the dispute but also to preserve the relationship between employer and employee.
Must be voluntary: A proposed settlement agreement is an offer and the employee can refuse that offer if they don’t agree to the terms. As voluntary agreements, settlement agreements are not legally binding until the terms have been agreed and signed by all parties.
Important to note: The employee must receive independent legal advice and their legal advisor must provide a signed statement for the settlement agreement to be legally enforceable. It is not an admission of liability by the employer, but a method to expediently conclude a dispute and mitigate the risk of litigation.
Created by lawyers: Docue’s platform allows you to access and customise a lawyer-made settlement agreement template so that all of the details are tailored to the relevant dispute as necessary (including details regarding termination arrangements, termination payment, waivers, warranties, indemnities, and confidentiality provisions).
Easy to use: To create your letter of settlement agreement with confidence and speed, simply click through the intelligent tick box options and text box answers and you’ll have a comprehensive, tailored, and ready-to-use agreement in no time.
Electronic signature: When your settlement agreement drafting is complete the next step is easy, just use Docue’s e-signature tool to sign and send to the employee (or former employee) for countersignature.