Settlement Agreements  – What are they and what do they mean? By Danielle Ayres from Gorvin Solicitors

Understanding Settlement Agreements if you have been a victim of pregnancy or maternity discrimination

My experience working as an employment solicitor has given me a diverse array of situations to deal with and each client I meet has a different problem, has had different experiences and has a different outcome in mind. With the pregnancy/maternity discrimination cases I deal with and the ladies I meet as a result, this is no different.

I find that some just want justice, even if it means going through a timely, expensive and difficult Tribunal claim. There are those that want their day in Court, to observe their ex-boss squirming whilst they are cross-examined but the vast majority just want to put the past behind them, whilst getting something in return for the hurt and suffering they have experienced at another’s expense.

Given the bad publicity which can often come with a discrimination claim, the option of settling a claim is discussed in the vast majority of cases and even where I have an individual who is set on pursuing a claim, I always advise that the option should be given careful consideration. Where the individual is happy to enter into discussions, a settlement agreement will be drawn up and I have set out the main points below in order to dispel some myths about these types of agreement.

What is a Settlement Agreement?

A settlement agreement, formally called a compromise agreement, is a legally binding contract between an employer and an employee that sets out the full terms of a settlement. It is a legal requirement that any settlement agreement is looked at and signed by a qualified professional.

What does a Settlement Agreement involve?

When an individual is offered a settlement agreement, deciding whether to accept can be daunting. Despite contrary belief, it’s important to note the employee is under no obligation to sign the agreement, however, an agreement is, more often than not, beneficial for both parties. For an individual it can:

Eliminate the often lengthy and stressful Tribunal process;
Provide the certainty of knowing how much money you are to receive and when;
Cut the costs associated with fees as these are usually covered by the employer; and
Give you the ability to negotiate on matters which a Tribunal does not have the power to consider, such as your reference
For a settlement to happen however, the employee must waive certain rights so that after an agreement has been reached, no claim or dispute can be made against the former employer: the matter is closed and a line in drawn in the sand in respect of the employment relationship.

What is in a Settlement Agreement?

Each agreement varies, however, there are usually a number of main clauses:

The claims to be settled — there will be a main paragraph dealing with the specific potential claims you are likely to have against your employer. Alongside this, there also tends to be two/three pages that contain the belt and braces — a list of every single claim you could ever expect to bring against your employer arising out of your employment contract;
The payments you will receive and the relevant tax issues — your advisor / solicitor should look at whether the sum of money offered is enough for you to be wavering your rights to bring a claim. The first sum offered does not have to be accepted, it can be negotiated. It is also worth bearing in mind that, as a general rule, the first £30,000 of a termination payment can usually be paid on a tax-free basis.
A confidentiality clause usually accompanied by a non-derogatory statements clause — a confidentiality, or gagging clause, ensures that following your signature, you will not bad mouth your employer. There should also be a clause to ensure that they will not say anything untoward or derogatory about you.
The agreement will be marked ‘without prejudice and subject to contract’, which means that it is not legally binding until it is signed.

Negotiations & Advantages

It is usual for negotiations to take place between the two parties in relation to the terms and content of the settlement agreement. These negotiations usually surround the amount of money that is being offered. However, it is also possible to negotiate other terms, which is an added advantage of signing up to an agreement over bringing a Tribunal claim.

For example, it may be important for you to ensure that you get a good reference from your employer, which once agreed can be annexed to the settlement agreement.

Often, especially with discrimination claims, an employee feels that they should be given an apology. Whilst they are few and far between, I have been able to secure apologies from employers who appreciate that they have handled a particular situation in the wrong way — this is often more important to an individual than receiving monetary compensation.

Another issue which I come across regularly is agreeing that any enhanced maternity pay that an individual has received does not need to be repaid.

Basically anything is on the table — you can ask to keep a company car for an extended period of time, ask that the company laptop be retained, ask for a contribution towards outplacement fees…..

Once negotiations conclude, the agreement can be drafted to ensure that all the agreed terms are included and then signed once both parties are (hopefully) happy.

Entitlements & Options

You are obliged to take independent legal advice on any proposal and therefore have the opportunity to discuss the same with your chosen solicitor. Whilst it is not required by law, it is usual for the employer to pay a contribution towards the legal costs.

Once you sign a settlement agreement, there is no going back — you will not be able to pursue any claims against the other party, whether or not those claims were in your contemplation at the time of signing or not.

If you chose not to sign any proposed agreement, you are free to bring a claim or continue to pursue any claim already issued. It does not mean that you will be prevented from discussing settlement as an option at a later stage. Every claim is appointed an ACAS Conciliator and their role is to try and facilitate settlement of cases, where possible.

So, if faced with the proposal of settlement, it is always worth considering. If an agreement can’t be reached, any without prejudice negations cannot be referred to in subsequent proceedings, so very rarely nothing is lost in considering the option and if a settlement can be reached it may do away with a lengthy and stressful Tribunal process and ensure that you can put the whole ordeal behind you, with a sum of money and other benefits to provide you with some security going forward.