Settlement agreements

What is a settlement agreement?

A settlement agreement is an agreement between an employer and an employee that ends the employee‘s employment. A settlement agreement may specify the type of severance pay, the terms of non–compete clauses, and other terms. Settlement agreements are often negotiated in the event of disputes between employees and employers.

How to negotiate a settlement agreement?

The negotiation process for a settlement agreement can begin once the employee has submitted a written notice of resignation. The employer may provide the employee with a contract that outlines the terms of the proposed settlement agreement. The terms of the contract may include the type of payments/reimbursements the employee will receive, the types of non–compete clauses that will be included in the contract, confidentiality and other terms.

Why is a settlement agreement required?

Settlement agreements are needed to help protect both the employee and the employer. The employee may be able to negotiate a settlement agreement that provides for more favourable terms than the default contract that the employer may provide. The employer may also want to negotiate a settlement agreement to help protect its interests. 

Settlement agreements help to avoid expensive litigations & tribunals cost after the employment termination.

Who pays for the settlement agreement?

It is the employee’s right to seek independent legal advice before signing a settlement agreement. The employer usually covers or contributes to the legal fees.