AGENDA
LEGAL MATTERS
BY MATTHEW AINSCOUGH, BELL & BUXTON INCORPORATING IRONMONGER CURTIS The lawyer has some advice on settlement agreements for employers and employees
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WHAT IS A SETTLEMENT AGREEMENT? A settlement agreement is a contract between an employer and an employee. Effectively, the employer promises to give the employee something (normally in the form of a lump sum payment) in return for which the employee promises not to bring claims against the employer. In order for the agreement to be legally enforceable, the employee needs to get legal advice and a lawyer’s signature on the agreement. Generally speaking, a settlement agreement will prevent an employee from bringing any claims of any nature at all against the employer. This is called ‘waiving claims’. Some settlement agreements
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exclude from the waiver claims for latent personal injuries or claims relating to pensions, so that the employee may still bring such claims even after signing the agreement. Normally a settlement agreement will ask the employee to keep the terms of the agreement confidential. They may also be required not to make any negative comments about the employer to anybody else. Most settlement agreements state that if the employee breaches any of the terms they are liable to pay the money back. Usually, a contribution towards legal fees for taking advice on a settlement agreement will be met by the employer.
Summary A settlement agreement is a contract between the employer and the employee where the employer promises to give the employee something (normally a payment), in return for which the employee promises not to bring certain claims against the employer;
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Once the employee has signed the agreement, they will be barred from bringing certain claims against the employer;
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Generally speaking, most payments from an employer are taxable. However, in certain circumstances the employer can make a payment of up to
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£30,000 to the employee tax free; Most settlement agreements contain a clause requiring the employee to pay money back if they breach any of the terms;
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The settlement agreement may state that the employee’s legal fees will be met by the employer – however, if the employer defaults, the employee will be liable for the fees (as a client of their firm of solicitors).
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If you would like advice on a settlement agreement as a business or an employee, please contact Matthew Ainscough on 0114 249 5969 or M.Ainscough @bellbuxton.co.uk
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