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Settlement agreements

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Frequently Asked Questions

A settlement agreement is a written and legally binding contract between an employer and employee, and it is most often used as a legal way for you and your employer to ‘part company’ under agreed terms.

Under the terms, you will give up your right to bring any claims against your employer in return for financial compensation.

Usually, an employer suggests a settlement agreement is used when they want to dismiss an employee, but an employee may also suggest using one.

An employee must receive independent legal advice from a solicitor about the settlement agreement for it to be legally binding. Employers usually pay towards the cost of this independent advice and a contribution of between £300+VAT and £500+VAT is common. However, if your situation is complex and your solicitor needs to negotiate on your behalf, then your legal fees may be higher than the contribution. In this case, your solicitor will discuss this with you and can ask your employer to increase their contribution. Sometimes it is worthwhile funding the additional legal fees yourself in order to achieve a better financial package from your employer.

If you have been offered a settlement agreement you should speak to a solicitor to make sure you get the best deal possible and to ensure you receive independent advice that is in your best interests.

We do offer a ‘no win no fee’ arrangement which is also called a Damages Based Agreement. This agreement means that we do not invoice you directly for our work, instead, we take a percentage of any financial compensation (damages) you win from your employer so that we can cover our costs.

In order for us to ensure our costs are covered on no-win/no-fee work, certain criteria must be met by the employee. One criterion is the salary. However, cases are also assessed on merit and the amount of time our solicitor feels will be required to win your case, so if you don’t meet our salary criteria it is still a good idea to give us a call to assess whether we can help you.

It may be possible for your claim to be funded by your home or car insurance company. Insurance policies often include ‘Legal Expenses Cover’ which includes cover for legal costs for employment claims. So if you don’t meet the salary criteria it is worth checking your insurance policies.

If you are thinking about using a solicitor then give them a call to discuss likely costs and possible funding options.

In order to claim unfair dismissal, you must meet certain conditions. For example, you must have worked continuously for the employer for at least two years at the time your employment was terminated, and you must also have been an employee rather than self-employed.

There are some important exceptions to the two-year qualifying period such as if the dismissal was related to a woman’s pregnancy or another discriminatory factor or if it was for a health and safety reason or whistleblowing.

If you think you may have been unfairly dismissed then speak to a solicitor so they can discuss your options with you.

Wrongful dismissal is a dismissal that has not followed the correct process. In legal terms ‘a dismissal in breach of contract’. A common example would be where the employer has dismissed an employee, but they have not served notice where there was an obligation to do so in the contract.

You do not need to have worked for a minimum of 2 years to claim for wrongful dismissal.

An unfair dismissal can only be claimed if you have worked for at least 2 years. You will have a claim for unfair dismissal if your dismissal was unreasonable or unfair. Dismissals are classed as ‘automatically unfair’ if the reason for the dismissal related to:

• pregnancy: including all reasons relating to maternity

• family reasons: including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependents

• representation: including acting as an employee representative

• trade union membership grounds and union recognition

• part-time and fixed-term working

• pay and working hours: including the Working Time Regulations, annual leave, and the National Minimum Wage

If you think you have experienced wrongful or unfair dismissal then you should contact a solicitor to check whether you have a claim and to advise you of the next steps.

It is unfair dismissal and pregnancy/maternity discrimination to select a woman for redundancy simply because she is pregnant or on maternity leave. However, she can still be made redundant in that situation when:

• the business closes down

• the business moves and she cannot get to the new place of work

• fewer employees are required for existing work.

There are special provisions that help to protect pregnant women and those on maternity leave:

• You must be given the first refusal on any suitable alternative roles.

• Your employer must offer you any jobs that become available elsewhere.

• Your employer must follow the normal redundancy process with you and any other staff being made redundant.

If you have been put at risk of redundancy or have been made redundant while pregnant or on maternity leave then speak to a solicitor so they can discuss your redundancy with you and ensure your employer is following a lawful process.

Constructive dismissal is when an employee feels they have been forced to resign because of the actions of their employer. In legal terms, the actions must fundamentally undermine the relationship of trust and confidence so that the employee regards him or herself as dismissed and resigns. The employee must resign in response to the breach of trust and confidence without delay.

If you think you may have a case for constructive dismissal then speak to a solicitor so they can discuss the actions of your employer to see if you qualify for constructive dismissal.

Gross misconduct is a term used to describe an action so serious that the relationship of trust and confidence between an employer and an employee has been undermined. For example issues such as theft, fighting or sexual harassment of a colleague could be grounds for gross misconduct.

If an employer feels that an employee has committed gross misconduct they may dismiss the employee without giving notice. However, the employer must still follow a proper investigation and disciplinary procedure.

If the proper process is not carried out before the decision to dismiss the employee is taken, then the dismissal may be regarded as unfair.

If you have been dismissed for gross misconduct and you feel the employer did not properly investigate the incident or that your actions were not serious enough to warrant dismissal for gross misconduct then speak to a solicitor so they can discuss your case with you.

Wrongful dismissal is a dismissal that has not followed the correct process. In legal terms ‘a dismissal in breach of contract’. A common example would be where the employer has dismissed an employee, but they have not served notice where there was an obligation to do so in the contract.

You do not need to have worked for a minimum of 2 years to claim for wrongful dismissal.

An unfair dismissal can only be claimed if you have worked for at least 2 years. You will have a claim for unfair dismissal if your dismissal was unreasonable or unfair. Dismissals are classed as ‘automatically unfair’ if the reason for the dismissal related to:

• pregnancy: including all reasons relating to maternity

• family reasons: including parental leave, paternity leave (birth and adoption), adoption leave or time off for dependents

• representation: including acting as an employee representative

• trade union membership grounds and union recognition

• part-time and fixed-term working

• pay and working hours: including the Working Time Regulations, annual leave, and the National Minimum Wage

If you think you have experienced wrongful or unfair dismissal then you should contact a solicitor to check whether you have a claim and to advise you of the next steps.

A solicitor charges per hour for their work and each hour is split into units. At our firm we charge £225 + VAT per hour and that is split into 10 units of 6 minutes. Each 6-minute unit costs £22.50 + VAT.

It may be possible for your claim to be funded by your home or car insurance company. Insurance policies often include ‘Legal Expenses Cover’ which includes cover for legal costs associated with employment claims.

You may also be able to fund your claim via a ‘no-win/no-fee’ arrangement which is also called a Damages Based Agreement. This agreement means that a solicitor does not invoice you directly for their work, instead, they take a percentage of any financial compensation (damages) you win from your employer.

If you are thinking about using a solicitor then give us a call to discuss likely costs and possible funding options.

The information given above does not constitute legal advice. It is provided for general information purposes only and may not apply in all circumstances.