Settlement agreements in employment—legal requirements
Settlement agreements in employment—legal requirements

The following Employment practice note provides comprehensive and up to date legal information covering:

  • Settlement agreements in employment—legal requirements
  • Effect of contracting-out provisions
  • Conditions regulating settlement agreements
  • Independent legal advice
  • Qualified lawyers
  • Creating a right of action against the legal adviser
  • Agreement must relate to particular proceedings
  • Future claims not contemplated by the employee
  • Drafting considerations
  • Claims that can be settled
  • More...

Settlement agreements in employment—legal requirements

This Practice Note examines the legal requirements that must be met in order for a settlement agreement (formerly known as a compromise agreement) to be binding and valid to settle statutory employment claims.

Effect of contracting-out provisions

Almost all claims that may be brought in an employment tribunal derive from a jurisdiction created by statutory provisions. Each such set of statutory provisions will include a provision that prevents the parties (or potential parties) to an employment tribunal claim from reaching an agreement that purports to settle the claim and, in so doing, purports to have the effect of ousting the jurisdiction of the employment tribunal to adjudicate upon the dispute. These provisions are usually referred to as 'contracting-out provisions', and they appear in similar form in a wide variety of employment legislation, eg in the Employment Rights Act 1996 (ERA 1996), the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A 1992) and the Equality Act 2010 (EqA 2010). They are designed to protect claimants (or potential claimants) by preventing them from signing away their right to bring or pursue a claim under a settlement agreement without adequate safeguards having been observed.

The contracting-out provisions work by imposing a basic rule that any agreement reached between persons that purports to prevent a person from making, or proceeding with, a claim to an employment

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