It is becoming increasingly common for employers in the UK to offer settlement agreements instead of going through the redundancy process with their employees. Settlement agreements – also known as compromise agreements – are also used by employers when they wish to resolve a dispute without going to employment tribunal.
At Thompsons, we have dedicated lawyers who specialise in supporting employees through the settlement agreement process. While there are many things to consider if you are offered a settlement agreement, many of those we represent are concerned about whether signing could affect their future career.
In this guide, our experienced employment lawyers will answer frequently asked questions about getting a job after a settlement agreement.
Do I have to work my notice period after a settlement agreement?
No, you do not necessarily have to work your notice period.
Your employer may offer you payment in lieu of notice (PILON). This usually means you will receive the benefits and money – including notice pay – you would have received during your notice period, without actually having to work it.
If your employer offers you PILON, it will be specified in the settlement agreement.
If your employer expects you to work your notice, you may wish to request PILON during negotiations. If your employer will not offer PILON, it is a good idea to request that time off for interviews is included in the agreement. Our specialist lawyers can support you through negotiating a settlement agreement with your employer to ensure that you get the best possible terms.
Is it more difficult to find a job after a settlement agreement?
In most circumstances, the existence of a settlement agreement alone will not hinder your ability to secure another job. However, some agreements may contain restrictions that prevent you from working for another employer for an agreed period of time.
Employers often want to prevent you from working for a direct competitor who could use the information and contacts you bring with you to harm your former employer commercially. These types of clauses are known as restrictive covenants and your employer may refuse to go down the path of a settlement agreement unless they are included.
Any restrictive covenant that is inserted into a settlement agreement should be reasonable and shouldn’t restrict you for a long period of time. It shouldn’t be so broad that it prevents you from finding employment across a whole industry or professional field.
It might be possible to agree on a waiver of an existing restrictive covenant with your employer to enable you to take up another job.
Restrictive covenants are a complex area of law that require advice from specialist employment solicitors.
Can I get a reference after a settlement agreement?
A positive reference can be helpful when applying for your next job. However, unless included in your agreement, there is no legal requirement for your employer to provide you with a reference.
A settlement agreement will commonly include a clause that places an obligation on your existing employer to provide you with a reasonable reference.
In some instances, a settlement agreement may contain a clause that states that the employer is only required to supply a ‘standard reference’. This is a basic reference that outlines your job title and period of employment, but no further information about your performance.
How do I specify my reason for leaving a job after a settlement agreement?
It is rare for a settlement agreement to specify a 'reason for leaving' as standard. However, when both parties are bound by confidentiality, it can be beneficial to agree what you will say to prospective future employers, as well as your friends and colleagues, about your reasons for leaving.
Some settlement agreements do not state the reason for leaving, while others mention 'redundancy' or 'mutual agreement'.
Will a settlement agreement include a payment?
The primary goal of a settlement agreement is for you and your employer to part company on terms of that benefit you both. It is common to receive a remuneration package that includes a cash payment in addition to pay and benefits owed. In many cases, this lump sum payment, or at least part of it, will be tax-free and help pay for your day-to-day expenses as you embark on finding your next job.
It is standard practice for the employer to cover legal fees for advice on the settlement agreement, so you should not be left out of pocket by the legal process.
What can you do if you can’t find work after a settlement agreement?
The professional legal advice you receive before you sign a settlement agreement should have considered any restrictive covenants which seek to prevent you from working, as well the issue of a reference.
A settlement agreement is very difficult to unpick further down the line. If you believe your signed settlement agreement is too restrictive you would need to take further legal advice to avoid being in breach of contract by taking a position which the agreement prohibits.
In the event that you are struggling to find work, it may be worth seeing if you are eligible for benefits such as Job Seeker’s Allowance or Universal Credit. Seeking careers advice from organisations such as the National Careers Service may also help with your job search.
Legal advice for settlement agreements
At Thompsons Solicitors, we have a dedicated team of experienced settlement agreement solicitors who can guide employees through the settlement agreements process, providing specialist legal advice and helping to secure the best outcome.