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Redundancies set to drive surge in Settlement Agreements By Tina Chander, partner, Wright Hasall
W
hen the furlough scheme is finally phased out, it is
inevitable that redundancy- related dismissals will be unavoidable for many employers as they face tough trading conditions and difficult decisions in the coming months.
According to experts, this trend will lead to an increase in the use settlement agreements, as businesses across a range of sectors look to reduce the risk of tribunal claims, especially if something has gone wrong during the redundancy process.
A settlement agreement is a legal contract between the employer and employee that some businesses are utilising when making workers redundant. Typically, a settlement agreement will offer the employee an enhanced redundancy package, allowing them to receive a payment higher than their contractual entitlement.
In return, the employee agrees not to pursue against the employer, any claims they believe may have arisen during their employment, its termination or the indeed the redundancy process.
How can it help? Given the scale and speed with which many businesses
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will act, the potential for costly mistakes is huge and settlement agreements are a viable tool to resolve some of the challenges presented.
Although businesses will hope for a straightforward and amicable split from employees being made redundant, it’s impossible to guarantee every redundancy will proceed without dispute, especially given the ongoing uncertainty surrounding the pandemic.
Naturally, the redundancy process can come with a lot of mixed emotions from both parties, so a settlement agreement will ensure you part company on certain agreed terms.
Under these terms, employees will waive their right to bring any claims against their employer, which will save any long-running and unwanted legal disputes.
Not only this, but settlement agreements ensure employees receive a fair financial package, higher than they usually would, which given the ongoing economic uncertainty, could make a big difference to their own personal situation.
It is important to note however that a Settlement Agreement cannot compel an employee to waive their
right to claim for any personal injury which the employee was not aware of at the date of signing of the agreement.
Agreeing neutral terms In some cases, there may have been a past incident that although addressed and resolved at the time, could resurface if the employee in question feels aggrieved at the prospect of redundancy.
In this situation, the business may feel it’s necessary to use a settlement agreement to avoid the potential of a costly employment tribunal, where there’s a risk the employee is awarded significant compensation.
However, before a settlement agreement can be arranged, its terms must be mutually agreed between the employer and employee and set out in the written statement agreement documents, identifying which claims the employee agrees not to pursue in exchange for the agreed payment.
These agreements should be customised for the specific employee and their individual circumstances, including a clearly expressed waiver of the specific claims.
With regards to the settlement payment, the agreement should also contain a clear
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