The Role of a Legal Adviser in Settlement Agreements

Settlement agreements are critical in resolving employment disputes, providing a structured and legally binding way for employers and employees to part ways on agreed terms. However, navigating the legal and practical complexities of these agreements can be challenging - this is where the expertise of a legal adviser becomes essential.

In this article, we explore the vital role a legal adviser plays in ensuring that a settlement agreement is fair, legally compliant, and tailored to protect their client's best interests.

What is a Settlement Agreement?
A settlement agreement is a legally binding contract between an employer and an employee, often used to bring an employment relationship to an end in a mutually agreeable way. These agreements can arise in a variety of circumstances, such as:

• Redundancies, including voluntary schemes
• Following grievance or capability procedures
• Personality clashes or workplace disputes
• When an Employment Tribunal claim has been pursued or is anticipated
• Situations where both parties agree to part ways amicably

In England and Wales, for a settlement agreement to be legally enforceable, it must meet specific requirements under Section 203 of the Employment Rights Act 1996:

• It must be in writing.
• It must relate to a "particular complaint" or "particular proceedings."
• The employee must receive independent legal advice from a relevant adviser regarding the agreement's terms and the impact on their ability to bring a claim before an Employment Tribunal.
• The adviser must carry appropriate professional indemnity insurance.
• The agreement must identify the adviser.
• It must state that the statutory conditions for a valid settlement agreement have been met.

Why is Legal Advice Required?
Under UK employment law, an employee must obtain independent legal advice before signing a settlement agreement. This ensures that the employee fully understands their rights and the legal consequences of signing, including the waiver of their right to bring most claims against their employer, such as:

• Wrongful dismissal
• Unfair dismissal
• Discrimination claims

Without this advice, the agreement is not legally binding.

The Role of a Legal Adviser
The responsibilities of a legal adviser vary depending on whether they represent the employer or the employee.

Acting for the Employer
When instructed by the employer, a legal adviser will:

• Draft the settlement agreement.
• Ensure it complies with legal standards.
• Tailor the terms to protect the business, considering factors such as potential claims, risk mitigation, and business resources.
• Balance the employer's objectives with the employee's statutory entitlements.

Acting for the Employee
When representing the employee, the adviser's role includes:

• Reviewing the terms of the agreement, including termination payments, confidentiality clauses, and restrictive covenants.
• Identifying any unfair or unclear provisions.
• Advising on whether the compensation offered is reasonable and reflective of the circumstances.
• Negotiating improved terms where appropriate.

Why Tailored Advice Matters
No two settlement agreements are the same. A legal adviser ensures the agreement reflects the specific circumstances of the employment and termination, including matters such as:

• Intellectual property rights
• Return of company property
• Future employment references
• Post-employment restrictions (such as non-compete clauses)

With professional advice, you can be confident that the agreement is comprehensive, fair, and legally sound.

Conclusion
Settlement agreements are a practical and effective way to resolve employment disputes, but their complexity means expert legal advice is essential. Whether you're an employer safeguarding your business or an employee safeguarding your rights, a legal adviser plays a key role in ensuring the agreement works for your best interests.

By meeting legal requirements, mitigating risks, and tailoring the document to the situation, legal advisers help both parties reach a clear, fair, and enforceable resolution.

Speak to Our Employment Law Experts

If you need advice or representation in relation to a settlement agreement, our Employment Litigation team is here to help. We provide clear, tailored advice to ensure you get the best possible outcome.

• Call us on 023 8063 9311
• Email us at enquiries@warnergoodman.co.uk