Settlement agreement legal advice: what the law requires

Why advice is compulsory

The general rule in employment law is that you cannot contract out of your statutory rights. Section 203 of the Employment Rights Act 1996 makes any such agreement void. A settlement agreement is an exception, and it only applies if specific conditions are met. The central one is that you received advice from a relevant independent adviser on the terms and effect of the agreement and, in particular, its effect on your ability to pursue your rights before an employment tribunal.

The same condition appears in the Equality Act 2010 and the other employment statutes, which is why agreements cite a long list of Acts.

Who counts as a relevant independent adviser

• A qualified lawyer: a solicitor holding a practising certificate, a barrister, or in Scotland an advocate or solicitor.
• A Fellow of the Chartered Institute of Legal Executives employed by a solicitors' practice.
• An officer, official, employee or member of an independent trade union, certified in writing by the union as competent to give the advice and authorised to do so.
• An advice centre worker, certified in the same way by the centre, where the advice is free.

The adviser must be covered by insurance or a professional indemnity for the advice. The adviser must not be employed by, or acting for, your employer or an associated employer.

What the adviser will do

1. Read the documentsThe agreement, your contract and any correspondence about the exit.
2. Ask about the backgroundWhat led to the offer, and whether you have complaints about how you were treated.
3. Explain the termsWhat you receive, what you give up and what you promise to do or not do.
4. Advise on the offerWhether the figures are right, how they compare with your likely claims and what could be improved.
5. Negotiate if you wantUsually by email with the employer or its lawyers.
6. Sign the certificateA short statement, attached to the agreement, confirming the advice was given and the adviser is insured.

The legal minimum is not much

The statute requires advice on "terms and effect". An adviser could meet it by explaining each clause without ever telling you whether the money is enough. Some high-volume services do little more. Before you instruct anyone, ask:

• Will you tell me what my claims are worth?
• Will you check the notice, holiday, bonus and tax calculations?
• Is negotiation included in the fee, and if not, what does it cost?
• Will I speak to a qualified solicitor?

What to send your adviser

• The draft settlement agreement and any covering letter.
• Your employment contract and any later variations.
• Recent payslips and your P60.
• Bonus, commission and share scheme documents.
• Letters or emails about redundancy, performance, disciplinary or grievance matters.
• A short timeline of what happened, in your own words.
• The date by which the employer wants an answer.

Who pays

The employer normally pays a fixed contribution direct to your adviser. See who pays the legal fees.

If the conditions are not met

If the adviser was not independent, not insured or not named, or the agreement does not identify the particular claims, the waiver of statutory claims fails. You could still bring those claims even after being paid, although a tribunal would take the payment into account. Employers check these points carefully, and it is the reason they will not accept a signature without the certificate.

About this guide. This page is general information, not legal advice, and reflects the law and published government plans on the date shown above. Frederick George is a legal referral service, not a law firm. For advice on your own circumstances we will introduce you to an SRA-regulated solicitor.