Why independent legal advice matters for a settlement agreement

Business man looking out window

If you have been offered a settlement agreement by your employer, there is often a temptation to sign the agreement quickly to bring an unwelcome situation to an end and receive payment.  

It is important to remember a settlement agreement is a legally binding document and you need to take legal advice on the detailed terms for the settlement agreement to be valid.

However, the standard terms in a settlement agreement may not be in the best interests of the employee and these will often need to be adjusted before they should sign.

There is a risk that employees are signing up to terms which may cause a problem in the future but are not obvious at the time. 

Negotiating the right terms for a settlement agreement

We represented an oil and gas worker based in Houston who was working for an Aberdeen company. His proposed settlement agreement restricted him from speaking to existing customers for 12 months or working for a similar company in the US, Brazil or UK - essentially rendering him unable to work for 12 months.

We negotiated the terms of the settlement agreement so he was able to seek employment in similar companies based in the US or Brazil, ensuring his career was not hindered.

This is why experience matters and the solicitor you choose to represent you should be well versed in settlement agreements. The clauses are complex and the payments carry important tax implications including recent changes to the law which can lead to penalty payments. 

It is important that all of the payments that you are entitled to when your employment comes to an end are included within the agreement. If they are not, then your right to recover these payments will be gone once the agreement is completed.

This could mean missing out on valuable payments such as notice pay, a bonus or payments for share entitlements.

How quickly do you need to accept a settlement agreement?

If your employer proposes a settlement agreement then you are entitled to a reasonable time to decide if you wish to accept. 

However, an agreement can be withdrawn at any time so acting quickly is important. 

It is also important to remember that you do not need to accept a settlement agreement. It may be possible to consider pursuing an Employment Tribunal claim instead if grounds for this exist.

If you need legal advice about a settlement agreement, then please get in touch for help.

Ross Milvenan

Ross Milvenan
Employment Law