Settling employment claims

The employment relationship can come to an end for a variety of reasons. Where the employee decides to move on to a new opportunity or retires, it is usually straightforward. Similarly, if an employee is dismissed for misconduct, there is a clear procedure to follow and, provided that this is adhered to and the employer has a fair reason for dismissal, there ought to be no difficulty

There are however a wide range of other reasons why an employer may want to bring an employment relationship to an end. Often when there have been tensions in the relationship or performance issues or a long term sickness absence, it can be difficult for an employer to know how to go about bringing the employment to an end. Then there are a variety of reasons why sometimes employers report that “It’s just not working out”.

In these circumstances, employers often consider offering the employee an enhancement on their statutory entitlement to notice and/or redundancy pay in exchange for the employee waiving their right to bring unfair dismissal proceedings or some other claim to the Employment Tribunal arising out of their employment or its termination.

Often I am asked if I can draft a letter for the employee to sign, saying that they are accepting the sum of money offered “in full and final settlement”. Unfortunately, it is not so straightforward. Employers need to be aware that, in order for the agreement to be binding, it either needs to be entered into with the assistance of a conciliation officer from the Labour Relations Agency (in NI) or ACAS (in GB) or the settlement agreement needs to include certain terms. If the agreement is not concluded with the assistance of a conciliation officer then the following conditions must be met:-

-          The agreement must specify the complaint that is being compromised / settled

-          The employee must have received advice from a qualified adviser (usually a Solicitor)

-          The adviser must have professional indemnity insurance in place

-          The agreement must identify the adviser

-          The agreement must state that the statutory requirements regarding settlement agreements have been met

A failure to ensure these criteria are met will lead to the agreement not being binding and may leave the employer still vulnerable to a claim. A simple letter, purporting to waive the employee’s rights to bring a claim simply will not suffice.

As the agreement is not binding unless the employee has received legal advice, it is usual for the employer to pay the employee’s legal fees in obtaining advice that leads to the execution of a valid compromise agreement.

In any situation where an employer is considering that the employment of an employee may come to an end and the employer is considering offering a settlement, specific advice should be taken to ensure that all of the formalities are taken care of to ensure that the agreement entered into is legally binding.

This article intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact me.



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