REDUNDANCY AND SETTLEMENT AGREEMENTS

As a result of the coronavirus are you at risk of losing your job? Has the term being “laid off” or “redundancy” been mentioned? If so, then it is likely to be a worrying time for you. Employment law can be a minefield and it is important that you get some good legal advice on where you stand and what your rights are. Sadly, the coronavirus epidemic is going to lead to people losing their jobs.

The first thing you should check is your employment contract to see if there any specific provisions within that relating to redundancy payments. If there are not then you will be reliant on the statutory scheme.

You are generally entitled to a redundancy payment if you have been employed for 2 years on more by your employer. You will be entitled to a week’s wages for every year you have been employed if you are between the ages of 22-41. If you are over 41 then you are entitled to a week and half’s. If you are under 22 then it is half a week’s wage. There is a cap of 20 years employment.

If you are being made redundant then your employer could have offered, you terms to terminate your employment which are contained in a settlement agreement. A settlement agreement is a legally binding contract between an employer and employee. The employer will agree to pay the employee settlement money and in exchange, the employee will agree to settle any claim that an individual may have against the employer. This means that once the agreement has been signed by both parties, the employee cannot bring a claim at a later date against the employer. It is vital therefore that the settlement agreement is fully understood before signing it.

A settlement agreement is often drafted in respect of ending the employment. However, in some cases a settlement agreement could be used where the employment is continuing but the employer and employee wish to settle a dispute that is ongoing between them. This blog will only deal with agreements that follow a redundancy or termination of employment.

When it comes to the settlement agreement, the terms of the agreement will usually be agreed between the parties. The terms are incorporated into a settlement agreement and the potential claim that the employee wanted to pursue against the employer, will not be pursed any further in consideration for a set agreed sum offered in the settlement agreement.

The settlement agreement should clearly state the breakdown of the payment being offered by the employer and the tax implication of any such payments. Often payments of up to £30,000 can be paid to an employee without any taxable deductions.

There are several factors you will need to consider in order to establish whether you are being offered a satisfactory settlement sum. One crucial factor in such a matter is the merits of your potential claim against your employer. It is important that you consult a solicitor and discuss the details of your case to establish the merits of a successful claim against your employer. Following your consultation with a solicitor, you will know whether you are settling for a fair and reasonable sum.

It is important to note, for a settlement agreement to be valid and binding, it will need to meet certain statutory requirements. The agreement must be in writing and it must highlight the potential claim that the settlement agreement is aiming to resolve.

Most importantly, the employee must have received advice on the terms and consequences of the settlement agreement from an independent solicitor or another defined adviser, as per the Employment Rights Act 1996.

Usually, there is no obligation on parties to enter a legally binding contract without the need for consulting a solicitor. However, since an employee may be giving up important rights by signing a settlement agreement, the law ensures that the employees are protected, by seeking independent legal advice before they sign a settlement agreement. Hence, the law requires employees to consult a lawyer or a trader union adviser prior to signing the settlement agreement.

The employer will usually pay the costs of an employee seeking legal advice on the settlement agreement. At Nayyars Solicitors we are specialist in providing this advice and in light of the Covid-19 outbreak are providing 30 minutes telephone consultation appointments.