We all want to have productive and profitable relationships with our employees, but sometimes that isn’t possible.
Knowing what to do for the best when irreparable damage has been done to that relationship is a trying time for any business – and especially so when you are just starting out. So, how do you attain a ‘clean break’ while maintaining your reputation and your sanity?
There are two ways to end that relationship and avoid the risk of a Tribunal or other legal action – you can get an Early Conciliation Agreement via ACAS (used when an employee has taken a case to ACAS for Tribunal consideration).
This Agreement is known as a COT3, and it is useful as there is no requirement for legal representation for either party – but, as such, the terms of the agreement are limited.If you are looking for a more bespoke resolution, then contacting Settlement Agreement Solicitors would be the best route to take.
What is a Settlement Agreement?
A Settlement Agreement is a legal document that is used to reach a mutually beneficial agreement between an employee and an employer.
This document outlines terms that permanently resolve a disagreement, preventing any further legal proceedings or claims being made (if the contract terms are met) and it often means the employee gets a financial payment in return for waiving their usual employment rights.
A Settlement Agreement must be created by an independent legal adviser, and they must be named in the document. This Agreement must be entered voluntarily – neither the employee nor the employer are obliged to agree to the terms contained in the document – but it must be signed by both parties.
It is best practice to request that your employee seeks legal advice from a solicitor that has experience in Settlement Agreements – all terms must be fair and of mutual benefit.
How does a settlement agreement benefit my business?
If you have a performance issue with an employee, or you need to deal with a disagreement quickly, a Settlement Agreement draws a line under the issue, creating a permanent solution.
You might have an employee that is having performance issues – they are not achieving as expected or falling behind in their work. Following ACAS-recommended disciplinary procedures might not be appropriate, due to the length of time that it might take – so you might decide that expediting the process would be easier, allowing you to end their employment without fear of any Tribunal action.
If you are dealing with an internal issue, where the employee is not seeking to leave and you are not looking to dismiss them, a Settlement Agreement can end the discussion and provide the aggrieved employee with terms that can be adhered to ensure that there is no longer an issue. This might be due to a dispute regarding holiday pay or bonuses, or any claims regarding discrimination. The specific terms for this sort of Agreement will be dependent on the situation but won’t include a ‘termination date’ as some that end a working relationship would.
From this perspective, a Settlement Agreement can put an immediate end to any disagreement, meaning no long, drawn out processes, less overall cost, and – above all – protecting the business reputation.
What is the process for reaching a settlement agreement?
Either the employee or the employer can suggest reaching an agreement; and at this point it is best to seek legal advice. Usually this happens when discussing performance or following a complaint.
A good employment solicitor will sit down with you as an employer and find out what you want to get out of the Agreement, and what the offer will be for the employee. Remember, this Agreement is to get the employee to waive their usual employment rights, so it needs to be mutually beneficial.
Once the document has been created, it needs to be presented to the employee for their agreement. Making sure that your employee has sought legal advice is important – some companies even pay for this themselves, depending on the situation.
The employee needs a reasonable amount of time to consider the Settlement offer, and ACAS recommends a minimum of 10 calendar days – unless agreed otherwise.
It is wise to presume that there will be some negotiation of the agreement, whether that be clarification of terms, an adjusted financial amount, or changes to the termination date – so be prepared that the final Settlement may not be what was originally laid out.
The Agreement must avoid any ambiguity, so both the employer and the employee know exactly what is expected of them (and when) – so, for example, the employee knows that they are not to disclose any details, and the employer will be paying them a specific amount on a specific date.
Once all the terms are agreed, the Settlement Agreement must be signed by both parties – it is not legally binding until that has happened.
Then, written notice of the expected ‘termination date’ should be given to the employee, so they know when to expect to leave their role. You might want to have a discussion about how you will communicate what has happened to other members of staff – often a mutually-agreed resignation is a good explanation that conveys the situation without being explicit and/or breaking the confidentiality clause – if there is one.
Once the documents are signed and witnessed, it is a legal document, and any breach of the agreement can lead to County Court proceedings.