This guide is maintained as a current resource for July 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Learn how settlement agreements affect your employment tribunal claims in England and Wales. This guide explains how signing can waive rights to pursue unfair dismissal, discrimination and other claims, the legal requirements for validity, confidentiality rules and practical implications for negotiating or refusing a settlement.
A settlement agreement is a legal contract between an employer and an employee (or former employee) used to resolve or avoid a dispute about employment rights, including unfair dismissal, discrimination, breach of contract, redundancy pay and other workplace complaints. In many cases, a settlement agreement will include a waiver of rights to bring certain claims to an employment tribunal in exchange for agreed payments and other terms. Understanding how settlement agreements interact with your right to pursue claims, what they can cover and their legal requirements is crucial for anyone considering such an agreement in England and Wales.
What a Settlement Agreement Is
Settlement agreements (previously known as “compromise agreements”) are written contracts negotiated voluntarily between an employer and employee to end a dispute and often the employment relationship itself. They typically specify:
- A financial payment or benefits.
- Terms of how and when employment will end.
- A waiver of certain employment claims.
- Optional terms such as a reference or confidentiality obligations.
To be legally valid, a settlement agreement must meet statutory conditions. These include that it:
- Is in writing and relates to specific complaints or claims.
- States clearly which claims are being waived.
- Includes evidence that the employee has received independent advice from a relevant adviser.
- Identifies that adviser and confirms they have the requisite insurance.
The statutory safeguards are designed to ensure the employee fully understands what rights they are giving up.
How Settlement Agreements Affect Your Claim
Waiver of Rights to Bring Claims
The core effect of signing a settlement agreement is that you waive your right to pursue the specific claims identified in the agreement:
- If the agreement lists claims such as unfair dismissal, constructive dismissal, or breach of contract, signing it will generally prevent you from bringing those claims to an employment tribunal.
- Terms can be drafted to cover current claims you have already made or claims you could reasonably be expected to make in the future.
- Employers will usually include language stating that you withdraw any ongoing tribunal claims and agree not to start new ones in respect of the listed matters.
Once a valid agreement is signed, it becomes legally binding and, except in limited circumstances, you generally cannot pursue the covered claims at a tribunal.
Limited Exceptions After Signing
There are some limited exceptions where rights may survive a settlement agreement:
- Breach of the settlement agreement itself - if an employer fails to pay sums or fulfil agreed terms, you may have a contractual claim for breach.
- Personal injury claims or certain pension claims which are not covered in the listed claims. Some narrowly defined claims (such as personal injury or accrued pension rights, where not covered) may remain recoverable, provided the agreement does not cover them.
- Claims for automatically unfair dismissal for specific reasons (e.g. whistleblowing, trade union activities, statutory rights) may not be covered by confidentiality provisions if discussed under protected conversation rules, but the waiver still generally prevents bringing them if expressly included.
Settlement agreements must specify the exact claims they intend to cover. Broad language such as “full and final settlement of all claims” is insufficient without listing particular statutory claims, otherwise enforceability issues may arise.
Negotiation and “Protected Conversations”
Discussions about settlement agreements are normally confidential and protected under legal principles (such as “without prejudice” and section 111A of the Employment Rights Act 1996) so they generally cannot be used as evidence in employment tribunal claims about unfair dismissal or constructive dismissal. However:
- If there has been improper behaviour (for example discrimination, harassment or undue pressure), discussions may be admissible as evidence.
- Confidentiality does not prevent evidence of discrimination in settlement discussions from being used where there was no “existing dispute” at the time under protected conversation principles.
Protected conversations and confidentiality rules are complex; their interaction with tribunal evidence rules is an important consideration when negotiating a settlement.
Refusing a Settlement Agreement
A settlement agreement is voluntary. You are under no legal obligation to sign it. If you refuse:
- You keep your right to pursue claims at an employment tribunal, provided you follow Acas Early Conciliation and tribunal time limits.
- Employers cannot lawfully force you to sign, and undue pressure may itself be relevant in later claims.
Many employees choose to negotiate settlement terms to get favourable financial terms or references in exchange for giving up claims. Understanding the implications of signing is therefore crucial.
Practical Issues When Considering a Settlement
Independent Legal Advice
Employees must receive independent legal advice on the terms and effect of a settlement agreement before signing. The adviser must be legally qualified, insured and clearly identified in the agreement. This requirement is statutory to protect employees from inadvertently forfeiting rights without proper understanding.
Specificity of Covered Claims
A settlement agreement must explicitly list which claims it covers. If claims are omitted or inaccurately described, those claims may remain open even after signing. Employers and employees often negotiate this carefully to balance protection and scope of waiver.
Impact of Not Signing
Refusing to sign a settlement agreement does not automatically extend your time to bring a claim. The usual tribunal time limits apply, and you should engage with Acas Early Conciliation and lodge any claim within statutory deadlines if you intend to proceed to a tribunal.
Confidentiality and Future Evidence
Confidentiality clauses often extend to the fact of the agreement and details of negotiations. These clauses must be drafted carefully, as they cannot lawfully restrict whistleblowing or reporting of crimes. Where confidentiality has been agreed, you may be restricted in what you can disclose to third parties, except as permitted by law.
Key Takeaways
Settlement agreements can have a significant impact on your ability to pursue claims in an employment tribunal. By signing a valid settlement agreement that specifically lists the claims being waived and after receiving independent advice, you generally give up your right to bring those claims, including unfair dismissal, discrimination, or other statutory claims listed in the agreement. There are narrow exceptions - such as breach of the settlement terms or certain excluded rights - but these are limited and depend on precise drafting. Because settlement agreements involve complex legal rights and sensitive confidentiality rules, careful negotiation and independent advice are essential to ensure you understand the implications before signing.
