Settlement agreements: Top tips
Very much inspired by the return this month of The Split (Season 2), our favourite TV drama, as opposed to our departure from the European Union, we wanted to turn the spotlight onto a lesser known, but no less important, part of our practice: advising senior executives on their severance terms and settlement agreements.
90% of the time, departing executives will leave under a settlement agreement. A settlement agreement (or compromise agreement as they were formerly called) is a legally binding agreement between employer and employee under the terms of which the employee agrees to waive statutory claims against their employer in return for some favourable, often, financial, package. This month alone, Team Torque will advise on over 20 different settlement agreements acting as independent adviser to a whole range of employees, from junior managers to PLC directors. It’s something we’re rather good at and last year advised on settlement packages in excess of £6million. Why is that? To coin a phrase from the 1980s, we won’t make a drama out of a (personal) crisis. Our primary role is to get the client the best deal that they can at the time, and to do so with the minimum of fuss and personal expense. It’s about keeping everyone’s eye on the prize (the exit), rather than getting too bogged down in the detail and the emotion of the impending separation. That we also negotiate large numbers of settlement agreements for employers means that we are measured in our approach. Our clients know that they can trust us to do a good job, that their matter will be given the priority it deserves and that they can call on us 24/7 as we understand the importance of having someone to provide a sympathetic ear at a time when they cannot readily turn to their normal support networks for advice and emotional support. In short, we’ll get the job done!
Having advised (literally) hundreds of departing employees on the terms of their settlement agreements, there’s certainly some do’s and don’ts to bear in mind should you find yourself in the situation of being presented with a settlement agreement:
Top tip 1
Do not panic. This is absolutely not the beginning of the end as far as your career is concerned. You will be amazed at the number of opportunities that will come your way and, time and time again we hear from clients who find themselves in this situation, that it was just the push that they needed to re-visit and re-evaluate their career and other personal choices.
Top tip 2
Negotiations can be time-pressured and therefore the sooner you can get copies of all relevant paperwork across to us, to include a copy of your contract of employment or service agreement together with copies of any relevant documents pertaining to your benefits (including bonus and other incentives), the better. If you don’t have copies of the documents yourself, ask for them from your employer and show them you mean business!
Top tip 3
Maintain confidentiality and only make very limited disclosures to your immediate family about a developing work situation. Under no circumstances should you start to post anything on social media about exit discussions or your bad day at the office. Settlement agreements will contain secrecy clauses and a prohibition against making derogatory remarks against the Company and its officers/employees as standard. It can make the negotiation more difficult than it needs to be if you have taken colleagues into confidence about your own personal situation, or you’ve overshared on social media, when, properly, you should not have done.
Top tip 4
Do your research on the job market. How likely is it that you’ll be able to find another role at or around the same remuneration package? If there’s something peculiar to your role/skill set, the market or timing more generally that needs to be a feature in the negotiation. For example, we’ve acted for a number of teachers recently and we know that proportionately there’s significantly more roles posted in March/April, in readiness for the successful candidate to be in post by September, than there are in October – February. Peculiarities like this can make a big difference in the negotiation phase.
Top tip 5
Be realistic and focus on the big picture. You may not get the financial terms you think you deserve, but by being pragmatic and facilitating a timeous exit process, you will find that your pathway to your next role is far smoother than you anticipated. With our help, you may also find that you’re able to negotiate favourable terms around announcements, restrictive covenants and retention of company property all of which are important in their own right.