You do not have to sign a settlement agreement, a settlement agreement is a voluntary agreement between you and your employer. Your employer can propose a settlement agreement and explain what may happen if agreement cannot be reached, but ultimately the decision whether to accept it is yours.
You are also entitled to negotiate the terms rather than simply accepting or rejecting the employer’s first proposal.
This is an important point because receiving a settlement agreement can sometimes make employees feel that their employment has already effectively ended.
That is not necessarily the case.
Until a settlement agreement is concluded, your existing employment relationship and employment rights will generally continue unless your employment is terminated through some other lawful process.
What happens next depends upon why the settlement agreement was offered in the first place.
There are several possibilities.
Refusing the initial proposal does not necessarily mean that negotiations have ended.
Your employer may be willing to increase the compensation or improve other terms to secure an agreement.
This could include:
The original offer may therefore be the beginning of a negotiation rather than the employer’s final position.
You do not necessarily have to respond to a settlement agreement with a simple “yes” or “no”.
You can make a counter-proposal.
For example, your solicitor might advise your employer that you would be prepared to settle if:
A reasoned counter-offer based upon your legal position can sometimes result in substantially improved settlement terms.
An employer can normally withdraw a settlement proposal before a binding agreement has been concluded.
This means there is some risk in rejecting an offer outright.
You should therefore understand what you might receive if you accept the agreement compared with what could happen if negotiations fail.
This is one of the reasons specialist advice can be valuable before responding.
If the settlement agreement has been offered as part of a proposed redundancy, refusing it does not necessarily prevent the redundancy process from continuing.
Your employer may continue consultation and ultimately decide whether your role is genuinely redundant.
However, the employer must still comply with the applicable law.
Signing a settlement agreement generally provides the employer with certainty because you agree to waive specified employment claims.
If you refuse to sign, those claims are not simply waived because your employer offered you an agreement.
Settlement agreements are sometimes proposed where an employee is already involved in disciplinary proceedings.
If you refuse the offer, the employer may continue the disciplinary process.
That does not mean dismissal is inevitable.
The employer should still investigate the allegations, follow an appropriate procedure and reach a reasonable decision based upon the circumstances.
Settlement agreements are also commonly offered where there are concerns about:
If you refuse the agreement, your employer may decide to continue its normal management procedures.
Again, this does not automatically mean that you will be dismissed.
Your employer cannot simply treat your refusal to sign as though you had agreed to leave.
However, refusing a settlement agreement does not prevent an employer from subsequently taking legitimate employment action.
For example, an employer might continue:
Those processes must still comply with the applicable legal requirements.
There is an important distinction between an employer explaining the potential consequences of rejecting an offer and improperly threatening an employee.
For example:
“If we cannot reach an agreement, we will continue with the disciplinary procedure.”
may simply explain what happens next.
By contrast, telling an employee before any disciplinary process has begun that they will definitely be dismissed if they refuse the settlement agreement may amount to improper behaviour.
You should not normally be expected to make an immediate decision.
As a general rule, the Acas Code of Practice recommends that employees should be given at least 10 calendar days to consider the formal written terms of a proposed settlement agreement and obtain independent advice, unless the parties agree otherwise.
The appropriate period can depend upon the individual circumstances.
You should use that time carefully.
Do not sign simply because you are worried that asking questions or seeking advice will cause the offer to disappear.
Not necessarily.
There is an important difference between rejecting the settlement completely and negotiating better terms.
If the offer appears too low, it may be better to make a reasoned counter-offer.
The strength of your negotiating position may depend upon factors including:
A specialist employment solicitor can assess these factors before advising whether the offer should be accepted, rejected or renegotiated.
One of the principal purposes of a settlement agreement is for an employee to waive specified legal claims in return for compensation and other agreed benefits.
If you do not enter into a settlement agreement, you have not agreed to that contractual waiver.
Depending upon the circumstances, you may therefore retain potential claims relating to matters such as:
Whether you actually have a viable claim is a separate question and will depend upon the facts.
This is why the potential value of your employment rights should be assessed before you decide whether the compensation being offered represents a fair exchange for giving them up.
Sometimes.
An employer offering a settlement agreement usually wants something in return: certainty.
The employer may wish to:
Those objectives may have a commercial value to the employer.
Where an employee has a strong legal negotiating position, a carefully presented counter-proposal can sometimes result in an improved settlement package.
There is no guarantee, however, that an employer will increase its offer.
Employees should avoid:
A settlement negotiation should normally be approached as a professional commercial negotiation.
Helen had worked for her employer for eight years when she was invited to a meeting and offered a settlement agreement following concerns about a proposed restructuring.
The employer offered her contractual notice together with an additional compensation payment equivalent to two months’ salary.
Helen was concerned that the restructuring process had not been handled properly.
Rather than immediately accepting or refusing the agreement, she obtained specialist legal advice.
Her solicitor identified concerns about the proposed process and advised that the initial compensation did not adequately reflect her negotiating position.
A counter-proposal was submitted.
Following negotiations, the employer agreed to:
Helen then decided that the revised settlement provided sufficient certainty and value to justify signing.
Every case is different, but this example illustrates why negotiating an unsatisfactory offer can sometimes be preferable to simply rejecting it.
No. Settlement agreements are voluntary. You are entitled to decline the offer or negotiate different terms.
No. Refusing to sign does not itself automatically terminate your employment. Your employer may, however, continue with another legitimate employment process that could ultimately result in dismissal.
Potentially, yes. Until a binding agreement has been concluded, an employer may normally withdraw its proposal. You should therefore take advice before rejecting an offer outright.
Yes. Settlement agreements are frequently negotiated. You may make a counter-offer seeking additional compensation or improvements to other terms.
The Acas Code recommends, as a general rule, allowing at least 10 calendar days to consider formal written terms and obtain independent advice, unless the parties agree otherwise.
Seek legal advice. There is a difference between an employer legitimately explaining the possible alternatives if settlement is not reached and improperly pressuring an employee by threatening inevitable dismissal.
You should normally obtain legal advice before resigning. Resignation can significantly affect your legal and financial position.
At Settlement Agreement Expert, I advise employees throughout England and Wales who have been offered settlement agreements.
If you are considering refusing an agreement because you believe the compensation is too low or the proposed terms are unfair, I can review:
I’ll explain your options in plain English and, where appropriate, negotiate directly with your employer to seek improved financial and contractual terms.
Before simply saying “no” to a settlement agreement, find out what your legal position may be worth.
