Settlement agreements vs Employment tribunals

    If you’ve been badly treated at work and/or are unhappy with the outcome of a grievance, you may be able to settle your dispute by way of a settlement agreement.

    Alternatively, you may be thinking about taking your case to an employment tribunal for their judgement.

    Which route should you go down: settlement agreement or employment tribunal? To help you make the right decision, we discuss the pros and cons of settlement agreements compared with employment tribunals.

    We start by looking at settlement agreements.
    See also our guides on settlement agreements and employment tribunals for further details.


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    Settlement Agreement Advantages

    In essence, a settlement agreement is a legally-binding document. It offers you a sum of money and sometimes other benefits, to settle your claims against your employer once and for all.

    See our Settlement Agreements guide for more information.

    The advantages of settlement agreements over employment tribunals include the following:

    Quick resolution of your claim

    Depending on the complexity and seriousness of your claim and how much it has affected you personally, you may prefer a settlement agreement so you can attempt to move on as quickly as possible.

    Although simple settlement agreements can be drawn up in a few hours, you are typically looking at anything from a couple of days to a few weeks from the initial draft to the conclusion of an agreement.

    The exact time will depend on the complexity of your case and the time it takes to negotiate the details with your employer.

    With an employment tribunal, you have the prospect of waiting for a year or more – from submission of your claim to the final employment tribunal hearing. (See more about this below.)

    You can be certain of the outcomes

    Many people opt for a settlement agreement because it offers more certain outcomes.

    While you may think you could get more if you went to a tribunal, you are not guaranteed any tribunal award at all. A settlement amount may well end up being your best bet.

    See our settlement agreement guide for more about the factors which affect settlement agreement payments.

    Some payments can be made tax free

    If you are offered a lump sum payment by your employer of up to £30,000 as compensation, you won’t have to pay tax on this ‘ex gratia’ payment in a settlement agreement.

    See our guide on the tax implications of settlements for further information.

    Employment reference and other benefits

    In many cases, an employer will agree to give you a basic employment reference, making it easier for you to move on and find a new job.

    Other company benefits such as keeping your company laptop, phone, private health insurance or shares may also be negotiated.

    An employment tribunal can’t order an employer to give you such benefits.

    Costs associated with settlement agreements

    The most obvious cost advantages of a settlement are those involving your time and how much money you may have to outlay to get a settlement agreement, as outlined below.

    There are also the mental health costs associated with stress and anxiety although they affect different people in different ways and are not so readily quantifiable.

    Time as a cost

    In terms of time, the cost to you of a settlement agreement will invariably be less than if you took your claim to an employment tribunal. You’re likely to have to wait a year or more for your case to be heard at a tribunal.

    The time you will have to devote to preparing for your employment tribunal hearing is also likely to interfere with other aspects of your life.

    Financial costs

    Financially, the cost to you of a settlement agreement is also likely to be less than bringing a claim at an employment tribunal.

    If you use a solicitor to help you negotiate your settlement agreement, you can often get ‘no win no fee’ deals. (See Monaco Solicitors’ fees guide for more.)

    The costs for legal advice to finalise your settlement agreement so that it becomes legally binding, are usually covered by your employer.

    Although there are no fees for issuing an employment tribunal claim, it is highly likely that you will need some independent professional legal advice during your employment tribunal journey. (Also see below.)


    Settlement agreement drawbacks

    There aren’t many drawbacks to having a fair settlement agreement, but they include:

    You can’t take any further legal action

    You won’t be able to make any further claims against your employer for any claims stated as settled in your settlement agreement. The only exception would be if a criminal act had been committed.

    Having to agree to a confidentiality clause

    A settlement agreement will usually include a confidentiality clause (sometimes also referred to as a non-disclosure or gagging clause).

    That essentially means you are not allowed to discuss the settlement or its contents with anyone else, apart from your immediate family, or professional advisers or for the purposes of issuing proceedings if there is a breach of the agreement.

    If you are found to have done so you could be asked to repay all the money you received.

    See our guide on non-disclosure and confidentiality agreements for further information.


    Employment tribunal advantages

    Taking your complaint against your employer to an employment tribunal does have some advantages over settlement agreements, which include the following:

    Free and easy to apply

    There is no charge for submitting an employment tribunal claim and you can get the process underway with an online approach to Acas for what’s called ‘early conciliation’ before you submit the tribunal claim.

    For further detail, see our guides on Acas early conciliation and on completing an ET1 employment tribunal claim form.

    You can start an employment tribunal claim for free. This process can be started online, which makes it easy and convenient to get the ball rolling.

    Your voice is heard

    Regardless of the outcome, you get your time in court to have your say.

    For some people this is actually more important than the potential financial reward: it allows you to speak your truth without fear of consequence, even if you don’t win the case.


    Employment tribunal drawbacks

    The drawbacks associated with employment tribunals at present far outweigh the benefits.

    Strict time limits

    There are strict time limits for an employment tribunal claim. In most cases, you only have three months less one day from the time that the event or events you want to make a claim for.

    Otherwise, you will be time-barred from issuing proceedings at the tribunal.

    In practice, this doesn’t give you much time to think about what you would like to do and take action.

    Details of your case are made public

    An employment tribunal hearing is held in public, so you will have to undergo cross-examination about your bad experiences in public. These could be reported in the media.

    Whilst some individuals may be happy for such detail to be made public, it would be intolerable for others.

    Potential high cost of a tribunal

    Going to a tribunal brings with it a financial risk, as you could be asked to pay your employer’s legal costs if you lose.

    What’s more, in order to increase your chances of winning you are likely to need specialist legal help to present your case, which can prove costly.

    See our guide on the costs of taking a claim to an employment tribunal.

    Very strict appeals procedures

    While you can appeal any judgement or decision made by an employment tribunal, it must be based on a point of law.

    You will have to identify any flaws in the legal reasoning of the original decision and submit an appeal within 42 days of the written decision or judgement being sent out to the parties.

    In practice, this often means that the original judgement will stand and your chances of appealing a decision are significantly reduced.

    See our guide on tribunal appeals and judgements for more information.

    Difficulty finding evidence

    To be successful at an employment tribunal you will have to gather and present clear evidence that demonstrates your employer was at fault.

    However, this is not always easy, especially if incident records were not made at the time of any unlawful behaviours/similar.

    Witnesses may also be unwilling to give evidence at the tribunal hearing.

    A stressful, lengthy process

    From making your claim and preparing your case through to attending the tribunal and receiving a judgement can take a year or more.

    As already mentioned, such a long wait can be extremely stressful for many people who are eager to move on with their lives.

    Should I choose a settlement agreement or employment tribunal?

    It’s unfortunate if your employer has put you in a position where you need to make such a tough decision.

    However, at the very least you have the opportunity to find some resolution and will hopefully be able to move on to the next steps of your life and career.

    After weighing up both options, many people find that taking a settlement agreement offers more benefits.

    You will also receive a guaranteed sum of money and the agreement can be concluded in a very short time – sometimes even on the same day – once negotiations have finished.

    Of course, settlement agreements aren’t the right solution for everyone. In addition to legal considerations, the choice depends a lot on personal preference and how much your negative experiences have impacted your life.

    But before you make a final choice between the two options, we strongly advise you to seek professional legal advice from employment law specialists.


    Next steps

    If you can’t resolve your employment dispute informally, or via a grievance procedure, you may want to make a claim against your employers.

    Whether you are thinking of a settlement agreement or an employment tribunal claim, we at Monaco Solicitors are specialist employment lawyers and are here to help you if we can.

    If you have a good case with supporting evidence we can provide expert legal advice about your claim and how much money it’s likely to be worth.

    To find out more about our no-obligation consultation, contact us:

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