What to Expect With a Settlement Agreement

If you and your employer agree to settle a dispute, either on your own or with the assistance of Acas, it will have to be reduced to writing. The document is called a settlement agreement or COT3.

You will be given a draft and told to consider it, usually with your solicitor, within a specific time frame. The following are some rough ‘rules’ of what you might expect from such an agreement:

You will receive a sum of money

Being offered a settlement agreement can be a shock, mainly when it is out of the blue. It will typically include some compensation (cash payment or sometimes other benefits such as a reference) in exchange for your agreement to waive any right to bring an employment tribunal claim.

This may seem obvious, but it is often a good idea to obtain specialist advice from a specialist employment solicitor before signing any settlement agreement. This will help you to examine your entitlements, tactics to use in negotiations, and negotiating strategy.

It is also worth noting that most settlement agreements will have a term stating that the settlement is not to be construed as an admission of guilt. It is also worth checking that any statutory payments, such as redundancy pay, are included. Additionally, any entitlement to commission payments should be recorded in the terms (a failure to do so could result in no such payment being made if there is an ‘entire agreement clause in the agreement). Most settlement agreements also have boilerplate language that aims to protect you from future claims by others, including health insurance companies and Medicare/Medicaid.

You will be allowed to leave the company

Generally, your employer will be willing to let you leave in a reasonable time frame (with any redundancy payments being paid out immediately) so that you can move on to another job and not have the stress of a long-term notice period hanging over you.

If an employee needs clarification about the terms of a settlement agreement NJ, they can ask their solicitor for advice. Often this will involve instructing a solicitor to communicate with their employer on their behalf. Still, in some circumstances, it may be more appropriate for the client to contact the employer directly.

Alternatively, the client may want to use the services of Acas (the government-funded Arbitration, Conciliation, and Advice Service) for their settlement agreement. This process involves Acas confirming the settlement terms, then using a document known as a COT3 to record the details.

You will be allowed to look for another job

Although your employer may be reluctant to offer you much time to look for another job, it is suitable for both parties to be clear on this point as soon as possible. As a general rule of thumb, you should be given at least ten days to think over an initial idea. This isn’t mandatory, though; you can typically make a counteroffer.

You will also need to be clear about any contractual rights that you have, i.e., if you are entitled to commission payments, then this needs to be recorded in the terms of the agreement.

The best way to do this is to contact a specialist employment solicitor who will provide legal advice on your employer’s offers and whether it is reasonable. They will also check that the settlement agreement meets specific legal requirements – most solicitors do this as part of an initial assessment for no charge.

You will be given a reference

Usually, the employer will offer the employee a reference letter as part of the settlement agreement package. A manager usually writes this letter stating that the employer would happily provide a positive and professional reference. This can be helpful when applying for new jobs, and the reference letter can help to substantiate your employment history.

The employer may also wish to include certain restrictions in the reference, e.g., not approaching their clients/customers or poaching their staff for some time after leaving the company (these are called restrictive covenants). The employer will also usually want to record that the agreement has been concluded without prejudice, save as to costs, and subject to contract.

Instructing a solicitor before entering into settlement agreement negotiations is always advisable. They will be able to advise you on the value of your case and will make every effort to negotiate the best terms for you.