In the United Kingdom, a settlement agreement (formerly known as a compromise agreement) is a legally binding contract that is used to settle a dispute or potential claim between an employer and an employee. It is typically used to resolve issues such as disputes over pay, discrimination, or unfair dismissal.

The settlement agreement will include terms of the agreement, such as a termination date, any financial compensation and a confidentiality clause. This can be used as a way for the parties to end an employment relationship in a mutually agreed and efficient way. The employee will usually receive financial compensation in exchange for waiving their right to bring a claim against the employer.

Knowing When a Settlement Agreement Has Been Breached

A settlement agreement can be considered breached when either the employer or employee fails to fulfil the obligations outlined in the agreement. For example, an employee may be in breach of a settlement agreement if they fail to meet a deadline for returning company property or if they disclose confidential information that was supposed to be kept private under the terms of the agreement.

Similarly, an employer may be in breach if they fail to make a promised payment or if they renege on a non-disparagement agreement. If an employee or employer feels that the other party is not upholding their end of the agreement, they can take legal action to enforce the terms of the settlement agreement.

Your Options if An Employee Breaches the Settlement Agreement

The options you have depend on whether the agreement has been finalised with payments made or not. Should payment have not yet been made, you can look to terminate the agreement and revoke any promised compensation or benefits to the employee. This option should be used only if the agreement gives the employer the right to terminate.

If the agreement is finalised and payment made, you can choose to pursue legal action to enforce the terms of the settlement agreement. This could include seeking a court order to compel the employee to comply with the agreement or seeking damages for any losses incurred as a result of the breach.

Getting Legal Advice

As settlement agreements are legally binding, it is important to seek legal advice to review the agreement and check the specific situation. Your chosen legal expert will guide you through the best course of action and will also advise you of the potential consequences of any legal action you decide to take.