Settlement Agreements are used primarily to settle statutory claims arising out of the employee’s employment or its termination. This will normally include Employment Tribunal claims such as Unfair Dismissal, Unlawful Discrimination, unlawful deduction of wages, Whistleblowing claims, and other statutory claims.
In general, employers will try and use a belt and braces approach to settle all and any claims against them, their officers or employees, or associated group companies etc. So, a settlement agreement will also normally settle breach of contract claims (such as wrongful dismissal or failure to pay commission). It will often settle claims in Tort, such as defamation, negligent misrepresentation, or personal injury.
However there are some claims which are generally not settled by a Settlement Agreement. These are:
- Personal injury claims of which the employee is not aware and could not reasonably be expected to be aware. So if the employee had tripped and hurt her knee a week before, she would be aware of that injury which would therefore be settled. However if she was exposed to asbestos dust and developed a breathing condition as a result, if she was not aware of that claim at the point of signing, she would be able to pursue it.
A lot of people suffer stress and anxiety at work and ask if that gives rise to a personal injury claim. Whilst it may do, such claims can be difficult to pursue. In any case, if a Settlement Agreement is concluded, that claim is likely to be settled if it was in the contemplation of the employee at the time of signing.
- Accrued pension claims: if there is any problem or dispute in the future, then the employee should be able to bring a claim to enforce her accrued pension rights.
- Enforcing the settlement agreement itself. If (for example) the employer breaches the Settlement Agreement by providing a poor reference, the employee should be able to then bring a claim in breach of contract for damages arising as a result. In that case, if the employee found that a job offer was withdrawn because the ex-employer had given a poor reference, then she may be able to claim for loss of earnings following the withdrawal of the offer.
It is also worth bearing in mind that a settlement agreement does not normally settle any claims that the employer may have against the employee. Whilst claims by employers against their ex-employees are relatively unusual, they are not unheard of. An employee can seek to settle any claims against them too, but that might arouse suspicion. In that case, there would also be an exception so either party could still bring a claim relating to fraud or criminal wrongdoing.
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