Settlement Agreements- New Term for Compromise Agreements

Settlement Agreements - New Term for Compromise Agreements

 

As of 29th July 2013 compromise agreements will be known as settlement agreements.

Compromise agreements are legal documents that are used by employers when they are seeking to end an employment law relationship with one of their workers. The document has to be in writing and the employee must obtain independent advice , usually from a solicitor,about the terms of the agreement and the consequences of signing .

Completing the agreement ends the employment law relationship and also means that the employee cannot raise any claim before an employment tribunal for the matters covered in the agreement. In return for completing the agreement and ending the relationship the employee receives financial compensation  for loss of future earnings and loss of employment law rights. This sum is paid by the employer and is tax free up to a limit of £30,000.

What is different about a Settlement Agreement?The fundamental difference with a settlement agreement compared to a compromise agreement lies in the fact that an employer can now approach an employee offering a settlement agreement without any previous procedure and if the employee does not wish to accept such an agreement or enter discussions about the terms of such an agreement then they cannot bring up the fact that they received such an offer in an unfair dismissal claim before a tribunal eg a constructive dismissal claim.

Also, often employers in the past have produced compromise agreements to employees with very short time limits for acceptance.Settlement agreements now should have a minimum 10 day period for consideration by employees unless each party expressly waives such a timescale. Employers at no time should exert undue pressure on the employee to accept the agreement.

At Employment Law Aberdeen we advise employees and companies on the terms of compromise agreements and settlement agreements. Contact us for free advice on this topic at any time on 01224 370208 or complete our online enquiry form.

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