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Legal Advice

For a settlement agreement to be enforceable as a bar to future litigation, the employee must have received independent legal advice on the effect of the agreement before it is signed.

The independent adviser is usually a qualified employment solicitor (or a certified and authorised member of a trade union). In particular, the employee must be advised of the impact of the agreement on their ability to bring claims against the employer.

An adviser’s remit should normally be wider than simply advising as to the effect of the agreement. They should analyse the facts and advise the employee of their potential claims, assess the value of those claims against the payments being offered, and advise as to what will happen if the employee does not sign the agreement. The adviser should also be able to assist with general queries about taxation, although specialist tax advice may be required for complex payment structures. Depending on the terms proposed it may well be appropriate for the adviser to negotiate an increased ex-gratia payment or changes to the drafting of the settlement agreement.

It is a requirement that the independent adviser is subject to a contract of insurance or professional indemnity covering the risk of a claim by the employee in respect of loss arising from the advice.

Frequently the legal adviser will be asked to provide a certificate confirming that they have advised the employee on the effect of the settlement agreement.

Employers normally make a contribution towards the costs of the employee obtaining the advice as it is in their interests to ensure the agreement is binding and an enforceable bar to future claims.

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