A settlement agreement is a full and final settlement of a dispute that will be accepted by a court. It means that an employee has agreed not to pursue a legal claim against the employer in return for some kind of benefit.
The agreement is a contract that legally settles a dispute without recourse to a court of law. It usually ends any employment relationship. The benefit or compensation usually concerns a sum of money and, perhaps, an agreement about other terms.
For the settlement agreement to waive the employee’s statutory employment claims and become legally binding, the employee has to receive legal advice from a solicitor.
An agreement has to fit the relevant facts so there is no one-size-fits-all agreement that can be used. Settlement agreements can be useful for an employer in order to avoid the publicity, costs or uncertain outcome of an Employment Tribunal case. For employees a settlement agreement can secure a settlement sum without recourse to Employment Tribunal litigation.