Do Employees Need a Lawyer for Settlement Agreements in the UK?

Settlement agreements are legally binding contracts in the UK, typically used to resolve workplace disputes or end employment on agreed terms, often involving compensation in exchange for waiving the right to bring claims against an employer. A key question for employees is whether they need a lawyer to navigate this process. This guide explores the legal requirements, benefits, and considerations of involving a lawyer, drawing on credible UK sources and aligned with UK law.

Legal Requirement for Independent Advice

Under UK law, for a settlement agreement to be legally binding, employees must receive independent advice on its terms and effects, particularly on their ability to pursue claims in an Employment Tribunal. This requirement is set out in legislation such as the Employment Rights Act 1996 and the Equality Act 2010. The adviser must be:

Qualified: Typically, a solicitor, barrister, certified trade union official, or advice centre worker with relevant professional indemnity insurance.
Independent: Not acting for the employer or connected to them.
Named in the Agreement: The agreement must identify the adviser and confirm they have advised you.

Without this independent advice, the settlement agreement is not enforceable, meaning you could still pursue tribunal claims. In practice, most employees choose a solicitor to provide this advice due to their expertise in employment law.

Why a Lawyer Is Usually Necessary

While the law requires an independent adviser, a lawyer (specifically an advisor specialising in employment law) is often the best choice for several reasons:

Settlement agreements can be lengthy and contain legal jargon, covering issues like compensation, tax treatment, confidentiality clauses, restrictive covenants, and waived claims (e.g., unfair dismissal, discrimination). A lawyer can:

Explain the agreement’s implications in plain language.
Clarify how it affects your rights, such as your ability to bring future claims or discuss the agreement’s terms.
Ensure you’re not unknowingly waiving valuable rights, such as claims for personal injury or pension entitlements, which are often excluded but require careful review.

A specialist employment law advisor can evaluate whether the compensation offered is reasonable by:

Comparing it to potential tribunal awards, factoring in your salary, length of service, and the strength of any claims (e.g., unfair dismissal or discrimination under the Equality Act 2010).
Checking that tax-free payments (up to £30,000 for termination payments) are correctly structured to avoid unexpected tax liabilities.
Ensuring other entitlements, like notice pay, holiday pay, or bonuses, are included and correctly calculated.

If the offer is inadequate, a lawyer can negotiate on your behalf to secure:

Higher compensation, especially if you have strong grounds for a tribunal claim.
An agreed reference to support future job applications.
Removal or relaxation of restrictive covenants (e.g., non-compete clauses) that could limit your future employment.
Additional benefits, such as extended notice periods or outplacement support.

Negotiations are often conducted on a “without prejudice” basis, meaning they can’t be used in tribunal proceedings if talks fail, unless there’s improper behaviour (e.g., undue pressure).

A lawyer can spot issues you may not have considered, such as:

Potential discrimination claims (e.g., based on protected characteristics like disability, pregnancy, or race), which could increase the value of your settlement.
Incorrect redundancy calculations, using tools like the GOV.UK Statutory Redundancy Pay Calculator.
Clauses that are overly restrictive, such as broad confidentiality agreements that could limit your ability to discuss your experience (except for protected disclosures under whistleblowing laws).

Employers may impose tight deadlines or imply that the offer is “take it or leave it.” A lawyer can advise whether this constitutes improper behaviour, which could weaken the agreement’s enforceability, and ensure you have sufficient time to consider the offer (Acas recommends at least 10 calendar days).

Can You Use a Non-Lawyer Adviser?

While a specialist employment law advisor is the most common choice, you can use other qualified advisers, such as:

Trade Union Officials: If you’re a union member, they can provide advice, often at no cost, but their expertise may vary compared to a specialist employment lawyer.
Advice Centre Workers: Some organisations, like Citizens Advice, may have certified advisers, but their availability and experience in handling settlement agreements may be limited.

Non-lawyer advisers may suffice for straightforward agreements with fair terms, but they may lack the legal expertise to negotiate complex terms or assess the value of potential tribunal claims. If your case involves discrimination, redundancy, or significant compensation, a solicitor is strongly recommended.

Who Pays for the Lawyer?

Employers typically contribute to the cost of your legal advice, as this is necessary for the agreement to be binding. Key points to understand:

Contribution Amount: Employers often offer a fixed sum (e.g., £250–£500 plus VAT) to cover advice. This may be sufficient for reviewing a straightforward agreement but may not cover extensive negotiations or complex cases.
Additional Costs: If negotiations or disputes arise, legal fees may exceed the employer’s contribution. You may need to cover the shortfall or negotiate a higher contribution as part of the agreement.
No Obligation to Sign: The employer’s contribution is usually conditional on you signing the agreement. If you decline to sign, you may be responsible for any legal fees, unless otherwise agreed.

Always confirm the fee structure with your solicitor upfront and check whether the employer’s contribution covers their services fully.

When Might You Not Need a Lawyer?

In rare cases, you may not need a specialist employment law advisor if:

You have access to a highly experienced trade union official who can provide equivalent advice, or
You are negotiating Terms through an ACAS conciliator.

However, even in these cases, consulting a lawyer is advisable to avoid overlooking issues that could affect your rights or financial outcome. The cost of legal advice is often outweighed by the potential benefits of a better settlement or avoiding costly mistakes.

Risks of Not Using a Lawyer

Proceeding without a solicitor (or with an unqualified adviser) carries significant risks:

Unfair Terms: You may accept an offer that undervalues your claims, potentially losing thousands of pounds compared to a tribunal award.
Legal Missteps: You might miss critical details, such as tax liabilities, overly restrictive clauses, or waived rights that could have been negotiated.
Invalid Agreement: If the adviser is not properly qualified or lacks insurance, the agreement may not be binding, creating uncertainty for both you and the employer.
Lost Opportunities: Without legal expertise, you may fail to identify grounds for stronger claims (e.g., discrimination or whistleblowing), which could justify a higher settlement.

How to Find a Lawyer

To find a qualified employment solicitor:

Ask Your Employer: They may provide a list of firms they work with, but ensure the solicitor is independent and acts in your best interests.
Use Professional Bodies: Search for employment law specialists through the Law Society (www.lawsociety.org.uk) or the Employment Lawyers Association.
Check with Your Union: If you’re a union member, they can recommend a solicitor or provide advice directly.
Seek Recommendations: Ask colleagues or contacts for trusted employment lawyers or check reviews for firms specialising in settlement agreements.

Choose an advisor with experience in employment law and settlement agreements, and confirm their fees align with the employer’s contribution.

Conclusion

While UK law requires independent advice for a settlement agreement to be binding, a qualified employment lawyer is usually the best choice to ensure you fully understand the terms, secure a fair deal, and protect your rights. A solicitor can assess the agreement’s fairness, negotiate better terms, and identify issues you might overlook, such as discrimination or redundancy rights. Although employers typically cover legal fees, the benefits of professional advice often outweigh the risks of proceeding without it, especially in complex cases. Take the time to find a reputable solicitor and review the agreement carefully to make an informed decision.

At Employment Law Services (ELS) LTD, we have extensive knowledge and proven experience in drafting and advising on settlement agreements. Whether you need practical advice, representation, or proactive support, our team is here to help.

Click here to book a free, no obligation consultation with one of our employment law specialists, or call us now on 0800 612 4772.