The rise of Settlement Agreements

In the current employment market and with anticipated, wide ranging redundancies expected over all service sectors in the coming weeks, a good deal of advice is going to be required by employees who are having their employment terminated.

Settlement Agreements (formerly known as Compromise Agreements) are often used in this situation, particularly for senior management and directors, and it is crucial to obtain independent legal advice to ensure that you receive the best outcome.

What needs to be considered?

In order for us to achieve the optimum outcome for our clients, it is crucial to take time to understand the background and to specifically identify the claims (and risks) faced by the employer seeking to terminate the employment relationship.

This includes assessing all relevant documentation (including the relevant policies and contractual provisions) and the client’s detailed instructions in respect of the circumstances which have led to the production of the Settlement Agreement, in the first place.

With this overview of the current position it is then possible to identify any leverage enjoyed by our client and which might generate the opportunity for the re-negotiation of the terms in the Settlement Agreement.
When negotiating the terms of any termination package, we will always, where appropriate and amongst other things, also seek to protect our client’s overall position in respect of:

• Notice and holiday pay;
• All contractual benefits;
• Compensation for loss of employment;
• Any outstanding bonus or commission;
• Any shares and/or share options; and
• The terms of a reference.

Negotiating terms

The BPE Employment Team have earned a particularly strong reputation in acting for clients who have found themselves in a position where their employer is seeking to terminate their employment via a Settlement Agreement. Our clients value enormously the comprehensive approach and expertise that we deploy when negotiating with employers and their advisers, on their behalf.

We use the production of a Settlement Agreement as the start of the termination negotiations, rather than the end. After all, when starting a negotiation, “who makes their best offer first?!”

We will also never lose sight of our client’s ability to acquire alternative employment and the application of any restrictions that may interfere with their post-employment conduct.
Our substantial experience also enables us to structure the termination package in order to provide the most attractive and efficient conclusion in terms of the tax payable (or not payable) by our client in connection with the compensation for loss of employment.

For more information and support regarding Settlement Agreements, please contact a member of our Employment team. 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.