A settlement agreement is a contract between an employer and employee, usually for a sum of money, in return for the employee’s agreement not to pursue any claims in an Employment Tribunal or any other Court.
A settlement agreement can be onerous on an employee and there are several terms that employment law solicitors would expect to be in a settlement agreement including a tax indemnity, waivers, warranties, non-derogatory clause and a confidentiality clause.
A confidentiality clause can be of vital importance to an employer, but the use of confidentiality clauses has come under question within the last few years because of their potential to ‘gag’ victims of misconduct, particularly sexual harassment. Accordingly, a settlement agreement shouldn’t prevent an employee from: –
- Making a protected disclosure (whistleblowing) under section 43A of the Employment Rights Act 1996
- Making a disclosure to a regulator regarding any misconduct, wrongdoing or serious breach of regulatory requirements
- Reporting a criminal offence to any law enforcement agency
- Co-operating with any law enforcement agency regarding a criminal investigation or prosecution
- Reporting tax-related concerns to HMRC
- Any other disclosure as required by law or to comply with a Court order.
A settlement agreement should also not prevent an employee from pursuing a personal injury claim that has not yet arisen or prevent an employee from pursuing any accrued pension rights in connection with an occupational pension scheme.
Lastly, whilst the general aim of a settlement agreement is to settle all claims connected to the employee’s employment or its termination there are a limited number of claims that cannot be settled via a settlement agreement.
These include but are not limited to:-
- Claims under section 1888 of Trade Union and Labour Relations (Consolidation) Act 1992 for failure to inform and consult with appropriate representatives on collective redundancies
- Claims under Regs 16 (1) and reg 12(7) Transfer of Undertakings (Protection of Employment) Regulations 2006
- Claims under Regs 5, 12, 13, 17(2) Agency Workers Regulations 2010
- Claims under Reg 2(2) The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015
It’s also not possible to contract out of the right to receive a statutory payment such as statutory maternity pay if the employee is eligible to receive it.
Please note that this is for general reference and is not intended to be specific legal advice. If you need assistance with advice on a settlement agreement or to negotiate a settlement agreement please please contact us on 01483 303636 or email email@example.com to see how we can help you.