A Settlement Agreement is a legally binding contract between an employer and an employee, typically used to resolve disputes. 1 These agreements formalize the terms agreed upon by both parties, often concerning the termination of employment or other workplace issues, such as alleged discrimination or unpaid wages
While frequently associated with the end of employment, Settlement Agreements are not limited to this context. They can be used to resolve any potential employment claim, even when the employment relationship continues.
Settlement Agreements are often seen as an efficient way to resolve disputes and prevent claims from reaching an Employment Tribunal. They allow parties to reach an early resolution, avoiding the time, inconvenience, and costs associated with tribunal proceedings. They also provide greater control over the outcome through negotiated settlements, rather than risking an unfavorable tribunal decision.
In a Settlement Agreement, an employee agrees to waive their right to pursue certain legal claims against their employer. In return, the employer provides the employee with consideration, typically financial compensation, to compensate them for relinquishing those rights.