An employment settlement agreement is a contract between an employer and an employee that is legally-binding. Under these types of agreements the employee generally agrees to receive some benefit (normally a sum of money, although this can include non-financial benefits as well) and, in return, they agree to not sue their employer (whether in the Employment Tribunal and/or in the civil courts). This is why such an agreement is called a “settlement agreement”: under the agreement the employee is agree to “settle” their right to bring claims against their (former) employer (this could include, for example, a claim for unfair dismissal, discrimination, harassment or victimisation).

We refer to these settlement agreements as “employment settlement agreements” in order to distinguish them from other types of settlement agreements that you might receive in other areas of law (for example, a divorce settlement agreement).