Don’t Sign Yet: How Negotiable Is a Settlement Agreement?

You may have been presented with a Settlement Agreement (SA) and advised that you need to seek legal advice and arrange for the SA to be returned to your employer within a short space of time. Whilst this is common, many employees are under the misapprehension that the SA must be signed and returned and that this is their only option. This is not the case.

There are circumstances where an employee is leaving on very good terms with their employer and is completely satisfied with the SA, with no other thought than to sign it. This is perfectly fine and entirely the employee’s choice, and Churchers will not try to change a client’s mind if that decision has been made. However, it is very important for an employee to ensure that they receive independent legal advice. This does not simply mean meeting with a legal representative to arrange the signing of the SA, that alone does not constitute proper legal advice.

Preparing for Settlement Agreement negotiations

Once you are made aware that your employer wishes to make an offer of settlement, you should think carefully before responding. Do not rush to make a counteroffer. It is important to take time to plan what outcome you want to achieve and how that outcome might best be achieved.

Because an SA can only be valid if independent legal advice is obtained, you should speak to your legal representative about the terms offered before accepting them. Even if you are happy with the terms, you should still take the step of obtaining legal advice before proceeding.

Contract of Employment

It is essential to check your contract of employment before agreeing to the terms of the SA. There may be several contractual considerations that could affect the terms of the agreement. Key considerations include:

Do you have a contractual entitlement to a bonus that is not provided for in the SA?
Is the notice period you are entitled to correct?
How will any payment in lieu of notice be dealt with?
Are you bound by any restrictive covenants (for example, a non-compete clause that may affect future employment opportunities)?

Have you properly read the SA?

This may seem obvious, but it is important to take the time to carefully review the SA. It is your legal representative’s role to ensure that you fully understand both the terms of the agreement and the process involved. Having a clear understanding of the relevant clauses and making a note of anything you do not understand before meeting your legal representative is always advisable.

Are Settlement Agreements negotiable?

Yes, they are very much negotiable, and you should not be advised otherwise.

It is important to remember that your employer has offered the SA to ensure that the terms of your departure are recorded and to prevent you from bringing any future claims once the agreement is signed. In many cases, employers will wish to enter into an SA for this reason alone, even where the employment relationship remains positive and the employee is leaving voluntarily. From the employer’s perspective, it is often a safe option.

It is therefore sensible to carefully consider, and fine-tune, how you approach negotiations. While you should avoid being overly aggressive, the principle of “if you do not ask, you do not get” often applies. However, it is important to note that the proposed terms of an SA amount to a contractual offer. If you do not accept the offer and instead make a counteroffer, the original offer is technically no longer available if the counteroffer is rejected.

That said, there is generally little harm in negotiating an SA. In most cases, the reasonably worst-case scenario is that the employer simply restates its original offer and confirms there is no room for negotiation. While employers can withdraw settlement offers, this is relatively uncommon and the risk is usually low, albeit not nonexistent. Once your legal representative understands the circumstances leading up to your proposed exit, that risk can be better assessed. Equally, being too quick to accept an offer may not be the right approach if the circumstances suggest you have a strong potential claim.

When have you got the best deal?

The key is knowing when to stop negotiating and accept the financial settlement being offered, even if it is not perfect. Churchers experienced employment law team can help you understand what constitutes a good settlement once initial negotiations have taken place, and whether it is sensible to continue negotiating or to withdraw from discussions.

It is not just a question of negotiation; it is also about understanding an employee’s personal circumstances and how having no settlement, as opposed to a settlement, may impact them. Factors such as future employment prospects, likely timescales, travel considerations, and any appetite to pursue a claim through the Employment Tribunal should all be taken into account. These factors, once discussed and assessed, will help the employee decide whether to negotiate further, withdraw, or accept the terms proposed.

It is important not to make unrealistic offers to an employer, as doing so can hinder (or even destroy) the possibility of a negotiated exit. A realistic, strategic approach is far more likely to achieve the best possible settlement for your individual circumstances.

If you would like to receive legal advice on your employment dispute or a Settlement Agreement, please contact our expert employment law team on 01329 822 333

https://www.churchers.co.uk/services-individuals/dispute-resolution/