A settlement agreement is a special agreement under which an employee can settle statutory employment claims (and others) against an employer. These agreements are common where an employee is leaving a business or where an employment tribunal or other claim has been started or is threatened. Settlement agreements used to be called  compromise agreements.

There are certain statutory employment rights which an employee cannot agree to give up, unless this is done under valid settlement agreement or through a COT3 agreement overseen by ACAS.

In order to be a valid settlement agreement an employee must receive legal advice from a suitably qualified independent legal adviser before the agreement is signed.

As long as the legal requirement for a valid settlement agreement are complied with, the parties can include whatever they want in a settlement agreement as regards the terms negotiated between them. For example, it is common for the wording of any reference to be included but this is not always the case and will not affect the validity of the settlement agreement if not included.

To find out more information about settlement agreements follow this link.

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Updates: For employers: Redundancies | Settlement agreements | For employees: Redundancy |

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