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A settlement agreement is a legally binding agreement between employer and employee. It would usually provide for a sum of money to be paid by the employer to the employee, in return for agreement by the employee, not to pursue any claims against the employer in the employment tribunal or courts.
The agreement will usually contain clauses relating to confidentiality and may also include an agreed reference and clauses relating to post termination restrictions.
It can be used in various scenarios including redundancy, disciplinary and performance issues or grievances and settling work place disputes.
It means that any discussions or negotiations between the parties are confidential and “off the record” and cannot usually be used against the other party, if the negotiations break down and a claim is brought in the court or tribunal. An employer may also commence what is known as a “protected conversation” which is similar. If the employee has been placed under undue pressure or there is no genuine dispute, the discussions may not be “without prejudice” or protected from disclosure. Care should be taken in what is said in such communications, and you should seek specialist legal advice.