Settlement agreement explained
A Settlement Agreement is a legally binding contract made between an employee and employee. It is usually entered into at the termination of employment and sets out the full terms between the parties.
Settlement agreements can also be used to resolve an ongoing workplace dispute, for example, a dispute over holiday pay. These agreements can be proposed by either an employer or an employee, although it will normally be the employer.
Once a valid settlement agreement has been signed, the employee will be unable to make an employment tribunal claim about any type of claim which is listed on the agreement.
Where the employer and employee are unable to reach an agreement, the settlement discussions cannot usually be referred to as evidence in any subsequent unfair dismissal claim. Where the settlement discussions are held to resolve an existing dispute between the parties they cannot be used as evidence in any type of claim.
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A Settlement Agreement (previously known as a Compromise Agreement) is a legally binding agreement between you and an employee that normally provides for a termination payment by the Company in return for the employee's agreement not to pursue any claims in a Tribunal or a Court.
This is a standard letter which can be used where there has been previous or there is ongoing disciplinary or performance management actions and the Company would like to enter discussions with the employee about ending their employment relationship.