Settlement Agreements Q&A with Jemma Bennett


11 October 2023

By Jemma Bennett

Understanding Settlement Agreements

1. What is a Settlement Agreement?

A Settlement Agreement (formerly known as a Compromise Agreement), is a legally binding contract between an employer and an employee that outlines the terms and conditions under which the employment relationship will come to an end. It typically includes provisions related to severance pay, confidentiality, non-disparagement and other matters.


2. When are Settlement Agreements used?

Settlement Agreements are commonly used when an employer and an employee decide to part ways, often due to reasons such as redundancy, disputes, discrimination claims or other employment related conflicts. They are designed to prevent potential legal actions by both parties.


3. What does a Settlement Agreement typically include?

A Settlement Agreement can include the following:

  • Details about the termination of employment
  • The amount of compensation or severance pay the employee will receive
  • Clauses relating to confidentiality and non-disparagement
  • Waivers and releases
  • Return of company property
  • Any other specific terms negotiated between the parties.


4. Is a Settlement Agreement always drafted in the employee’s favour?

The terms of the agreement can vary widely based on the specific circumstances, negotiations, and the bargaining power of both parties. Settlement Agreements are intended to provide a mutual benefit, often allowing the employee to receive compensation while also protecting the employer from potential legal claims.


5. Can the terms of a Settlement be negotiated?

Yes, you have the right to negotiate the terms of the agreement. This can include aspects like the amount of compensation, the wording, and more. It is advisable to seek legal advice before entering into negotiations to ensure your best interests are protected.


6. Can I change my mind after signing a Settlement Agreement?

Once both parties have signed the agreement, it is generally legally binding.


7. Can a reference be included in the Settlement Agreement?

Yes, you can negotiate the inclusion of a reference from your employer as part of the Settlement Agreement.


8. Can I raise a grievance or discrimination claim after signing a Settlement Agreement?

In most cases, signing a Settlement Agreement means you are waiving your right to pursue legal action against your employer for claims mentioned in the agreement. However, if there is evidence of duress, fraud or some other irregularity in the agreement process, you might have grounds to challenge it.


9. Should I seek legal advice when signing a Settlement Agreement?

Each situation is unique so it is important to consult an employment lawyer to understand how the law applies to your specific circumstances. For further information or queries, please contact us on 01245 228115.