Employers have a legal obligation to abide by the terms and conditions agreed with an employee as part of a settlement agreement. As a result, a breach of the terms of the agreement on the part of an employer can have a number of significant implications, potentially paving the way for damages claims to be brought by an employee for breach of contract.
In this article, we’ll be taking a closer look at the consequences of breaching a settlement agreement. Although we’ll be focusing specifically on breaches made on the part of an employer, many of the points can also be applied to employees themselves. Let’s get started.
Settlement Agreements: Why Terms Matter
Settlement agreements often offer a win-win scenario to both employers and employees. Although the specific terms and conditions of the agreement may vary from case to case, all settlement agreements will see some kind of financial compensation awarded to the employee. In exchange, the employee must formally agree not to pursue any claims they might have brought against the employer, for example through pursuing their case in an employment tribunal.
The specifics of the agreement are set out in its terms and conditions, which can cover everything from the amount of compensation to the confidentiality surrounding it. The agreement becomes legally binding once both parties have signed on the dotted line. From that point onwards, any potential breaches of those conditions may lead to either side taking legal action in the courts.
Common Breaches of Settlement Agreements
Any violation of the terms set out as part of a settlement agreement can be described as a breach, and there are many ways in which parties may fail to honour the agreement. Having said that, some of the most common violations on the part of employers and employees include:
Inadequate or Delayed Payments
All settlement agreements include some form of financial compensation. The agreement’s terms and conditions set out the specifics of these payments, detailing the extent of compensation as well as the relevant timescales. Late or inadequate payments are a prime example of a settlement agreement breach.
Confidentiality is a central component of settlement agreement negotiations. As such, settlement agreements will always include a confidentiality clause of some kind, which could cover information relating to the employer’s business, the events leading up to the agreement or the terms of the settlement. Clauses that prevent the employee from making derogatory comments about the employer and its staff are equally common.
Unwarranted Employment Tribunal Claims
The main purpose of employment settlement agreements is to settle disputes between employers and employees out of court. If the employee continues to pursue a claim in court (for example before an employment tribunal) despite having signed a settlement agreement, the agreement is likely to prevent the action. However, the employer will seek reimbursement of its costs in defending the claim through a breach of contract claim against the employee.
What Happens if a Company Breaches a Settlement Agreement?
The legal consequences of either party breaching a settlement agreement vary depending on the terms and circumstances. Having said that, the most common course of action is for the party who has been subject to the breach to seek legal advice on their options and then to seek to resolve the issue through conciliation, mediation or the courts if necessary.
A specialist settlement agreement solicitor can greatly assist in this process, seeking to resolve matters and achieve what was the key purpose of the settlement agreement – to prevent litigation from occurring in the first place.
In cases where the dispute or breach cannot be resolved in this way, the infringed party may wish to bring a breach of contract claim. In turn, this could lead to the party filing for damages, which are aimed at compensating them for the losses suffered as a result of the other party’s violation of the contract.
There are many factors at play in determining the right course of action when dealing with settlement agreement breaches, whether they be on the part of the employer or the employee. For this reason, enlisting the help of a legal expert can go a long way in preventing breaches from occurring – as well as pursuing justice in cases where they do.
Contact our Settlement Agreement Solicitors
If you’ve been faced with a settlement agreement breach or are in need of expert legal advice on any aspect of employment law, get in touch with our dedicated employment solicitors today.
Contact us via firstname.lastname@example.org, complete our contact form or speak to a team member directly on 0330 123 1229. For further information on settlement agreements, please see our helpful Settlement Agreement Factsheet.