Sample Format of Settlement Agreement

Narendra Kumar

03 Sep, 2020

What is  Settlement Agreement?

Preferably, disputes get resolved through talking, mediation or formal procedures but there comes a situation when it becomes impossible to resolve the dispute, there’s another tool when the parties mutually agree to the end of an employment relationship: a settlement agreement.

The Settlement agreement also is known as ‘compromise agreements, It is used to set out the terms for agreeing to settle an employment dispute. Generally, it is an employer who proposes to enter into a agreement.

A settlement agreement is a legally binding contract, usually between an employer and employee. In this contract, the employee often waives the right to bring a financial claim against the employer in return for financial payment.

When Should you use a Settlement Agreement?

Settlement agreements are for multipurpose. The settlement agreement is not just used to end an employment relationship; in fact, they used to settle the disputes, mid-contract too, at any point in the relationship.

A settlement agreement can also be used to fix an ongoing workplace dispute, for example, a dispute over holiday pay, Accommodation allowance. Generally, the employer proposes for these agreements but it can be proposed by either an employer or an employee too.

When all the ways have failed to settle the disputes or differences arises in the employment or in respect to any agreement and clauses therein; settlement agreements offer a swift resolution and are generally less time-consuming and stressful than a tribunal. However, settlements agreement are expensive as they do carry the cost of financial compensation. They also have the potential to damage wider employment relations if used inappropriately.

Key Points about Settlement Agreements

• Settlement agreements are legally binding contracts
• Settlement agreement disregards the individual’s rights to make a claim covered by the agreement to an employment tribunal or court.
• The agreement must be in writing.
• Settlement agreement usually contains some form of compensation to the employee and may often include a reference.
• They are voluntary.
• They can be offered at any stage of an employment relationship.

Key Elements of Settlement Agreement

 Background of the Party

 In the recital part of the agreement the relation of the party must be release; like

• The Employer has appointed the Employee as [enter job title] since [enter start date].
• The Employer and Employee have agreed to settle the Particular Claims on the terms set out in this Agreement.
• The Employer enters into this Agreement without any admission of liability.

2. Withdrawal of Proceedings and Waiver

 The employee accepts that this agreement is binding on both parties and this is the final settlement.

• The Employee agrees to withdraw the proceedings that have already been presented; if any from the tribunal(s) or court(s), immediately upon signature of this Agreement
• The Employee agrees not to present to an employment tribunal or any other court any Claim which is a Particular Claim.
• Both the parties agree and acknowledge that it is their intention that this Agreement is in full and final settlement of all of the Particular Claims.

3. Profit Share

In consideration of the duties performed, the employer shall is entitled to the profits on the basis of his performance. Profit will be ascertained by the management of the company on the basis of work or task handled by the employer.

4. Governing Law and Dispute Resolution

This Agreement shall be governed by and construed in accordance with the laws of India, without giving effect to any choice of law or conflict of law provisions. The Parties consent to the jurisdiction in the courts of Uttar Pradesh.

5. Confidentiality

[The Employee settles that [he/she] will remain to be bound by the terms and conditions of employment which relate to confidentiality and restrictive covenants.

[The Employer and Employee agree that they will keep the existence and terms of this Agreement confidential (with the exception of disclosure to immediate family or relevant professional advisers, provided that those persons agree to keep the information confidential, or where disclosure is required by law).]

6. Entire Agreement and Enforceability

• This Agreement sets out the entire agreement between the parties and supersedes all prior statements, representations, terms and conditions, warranties and guarantees whenever given and whether orally or in writing.
• No variation of this Agreement shall be effective unless it is agreed by both parties and in writing.
• If any term of the Agreement is held to be illegal, invalid or unenforceable, in whole or in part, such part shall be deemed not to form part of the Agreement but the legality, validity or enforceability of the remainder of the Agreement shall not be affected.

7. Third Parties

[The Contracts (Rights of Third Parties) shall not apply to this Agreement and only the Employer and Employee shall have rights under it.]*

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