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Understanding Settlement Agreements

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What is a Settlement Agreement?

Under section 111A of the Employment Rights Act 1996, you can have a "protected conversation" with your employer, with a view to ending your employment under a settlement agreement. A settlement agreement brings your employment to an end and includes a number obligations that you will need to seek advice on. You will also be agreeing to waive your right to make any claims against your employer. You must get advice from a relevant adviser on the terms and effect of a settlement agreement in order for the settlement agreement to be considered legally binding. Acas has a Statutory Code of Practice on Settlement Agreements which is designed to help you understand the implications of Section 111A.  A COT3 settlement is a different type of settlement agreement that can only be done by an ACAS Conciliator. 


ACAS Code of Practice on Settlement Agreements

Settlement Agreements Guidance

Settlement Agreement Resources

Negotiate agreed terms 

You do not have to just accept whatver your employer offers you. Think about what leverage you have. Do you have a potential claim in the employment tribunal? Use whatever leverage you have or get a professional to negotiate on your behalf.   


Making a settlement agreement with your employer

Settlement negotiations are “without prejudice”

This means that the conversations regarding the offer of a settlement agreement and the agreement itself is considered 'off the record' and cannot be referred to in any disciplinary or grievance procedures or in court. 


Without prejudice communications and discussions

Without prejudice subject to costs offers and the employment tribunal

For a settlement agreement to be valid, you must be advised on its terms by an independent legal adviser, about the terms and effect of the settlement agreement and your ability to pursue any other complaints in the an employment tribunal.Your employer must make a contribution towards the cost of independent legal advice to have the terms of settlement explained to you. This is usually in the region of £500.  This payment should be set out in the settlement agreement itself.

Non-disclosure and confidentiality clauses 

There is always a clause which prevents you from disclosing information about the settlement agreement and prior conversations to anyone, apart from  your immediate family, legal or medical professionals or for the purposes of complying with a legal obligation. A clause preventing you from making any derogatory comments about your employer may also be included, you can also ask for such a clause to be included in your favour. 


Non-disclosure agreement guidance

Confidentiality clauses: measures to prevent misuse in situations of workplace harassment or discrimination

Last Updated: [27/09/2022]