What happens if I break a settlement agreement?

Settlement agreement

If you are leaving your employment or are in dispute with your employer, you may have been offered a settlement agreement. Settlement agreements differ depending on the type of employment, but the basis of the agreement is to agree to not make any legal claims against your employer in the future in exchange for an agreed payment.

A full breakdown on this topic can be found on our dedicated settlement agreement page here.

So, what happens if an employer or employee has breached their end of a settlement agreement? It is important to firstly identify that the solution to the breach will depend on the terms of the settlement agreement. If either party breaches the terms, the wronged party is entitled to raise a claim in the courts for breach of contract, and depending upon when the settlement agreement was entered into, this will also determine whether the claim can be brought in the Employment Tribunal or the County Court.

Where one party has breached the settlement agreement, the other party may:

  • Seek to enforce those terms; and/or
  • Seek damages by bringing a breach of contract claim.

What happens if an employer breaches a settlement agreement?

If the employer has breached the agreement, the employee can decide to bring a breach of contract claim against the employer. The aim of such a claim would be to compensate the employee for any losses they have suffered as a result of the employer’s violation of the agreement.

To sue for breach of contract, the employee must:

  • Prove that a contract was in existence, which was legally binding,
  • Prove that the other party (the employer) did not fulfil their part of the contract, and
  • Prove that they suffered loss as a result.

All three of these aspects should be provable with a legally valid settlement agreement.

What happens if an employee breaches a settlement agreement?

Depending on the breach itself, if there is an enforceable repayment clause included, an employee who later breaches the terms of their settlement agreement may be ordered to repay all or some of the money they were paid by the employer, together with any legal fees incurred by the employer as a result of the breach.

Here are some common instances of breaking a settlement agreement:

Failure to pay the sums due

If employers fail to pay the sum due within the agreement, an employee can pursue a claim depending on the wording of the agreement itself. Normally, payment of the settlement is not conditional upon the waiver of rights, but the agreements would still be binding on both parties.

Breach of employee warranty

A warranty is a promise made under the terms of the agreement. This may include the return of company property, deletion of confidential information, as well as what is included in their employment contract. This is important as if an employer discovers that the employee breached the terms of their employment contract – after the settlement is agreed – they are entitled to withhold payments due.

In short, this is because the agreement usually confirms that the payments are conditional upon certain warranties, and if an employer discovers the breach after the payment has been made, they would have to make a claim in order to rectify this.

Breach of a post-termination restriction

Usually, if an employer suspects that there has been a breach in restrictive covenants, it can sue for the loss that is has suffered as a result. This may include setting up conflicting businesses or soliciting former clients, and in these cases, an employer may also consider taking action against any new employer of the employee in certain circumstances.

If you are unsure whether your employer, or employee has breached a settlement agreement, please get in touch with our settlement agreement team. Most disputes with regards to a breach of the terms of a settlement agreement can be dealt with swiftly and without the need to incur substantial legal costs or the issuing of legal proceedings.

Our settlement agreement team provide:

  1. Same day appointments.
  2. Clear explanations and expert advice on the terms of the agreement.
  3. Your options and whether you should be seeking more than the offer already made to you.

The advice can be given either in person, by Skype/Face-time or by telephone.

If you wish to receive an immediate response to your enquiry, please telephone Simon Thomas on 01639 640164 or email at simon.thomas@hutchinsonthomas.com