Settlement agreement or Mutual agreement?

[Andy1111]

I hope someone will be able to assist with this issue.

I had been on furlough for 5 months (combination of stress and company happy with putting me on furlough) when the company rang me and offered a way to exit the company by way of settlement agreement. They verbally offered a £x ex gratia payment plus 1 month notice pay.

My notice period is actually 12 weeks. I didn't query this with them at the time as I didn't know even what the term settlement agreement was, and thought the 1 month must have been a mistake.

By email I said I wanted to pursue exiting the company by settlement agreement.

When receiving the draft settlement agreement, they had simply taken the £x ex gratia payment and used it to mostly pay for the 12 weeks notice pay. They definitely did not say they were going to do this in our verbal discussion. So I end up with a much lower ex gratia payment than they offered, and much lower offer overall.

I was very unhappy about this, and argued the point for the next 6 weeks.

They have now retracted the settlement agreement. They have justified their action by stating this was actually a 'termination by mutual agreement' all along and therefore they are within their rights to use the £x ex gratia payment to pay for the notice pay. They did not use the term 'termination by mutual agreement' at any point until they retracted the settlement agreement. They even admit that they didnt make this clear in email.

I am very unhappy they have done this as I think they have been very deceitful, but obviously do understand they are free to withdraw the agreement.

My question is are they correct to term this as a termination by mutual agreement, 8 weeks after stating all they way along that it was a settlement agreement. Have they acted unlawfully? Can I raise a grievance against them for their action?

Thank you! (This has caused me weeks and weeks of stress and not sleeping)

[ULA]

I think the point here is back to how the company started this process. They offered you a Settlement Agreement (SA) as a way to end your employment. Employers will offer a SA when they want to terminate a contract on terms mutually agreed with you in order that there is a clean break with no opportunity for you to take them to court or a tribunal for more money. There are a number of instances in which Settlement Agreements are used and they usually apply where the employer does not want to follow what could be a long, drawn-out process, such as a performance review or a full redundancy process, before being able to terminate.

The other factor about an SA is that the employee is required to take independent legal advice from an employment law adviser who will review the SA and make sure that the terms being offered are satisfactory since you will be giving up your rights to pursue claims against the company for example unfair dismissal. The cost of this advice is paid for by the employer up to a limit typically these days between £300 and £500. The issue for the company is that the employment law adviser would have soon picked up that they were not paying you the correct notice period as per your contract, plus depending on what the ex-gratia payment was, they may have said that is did not adequately compensate you for the rights you were giving up.

Maybe by trying to claim mutual agreement rather than under the terms of an SA, they believe they can "remove" the requirement for you to get independent legal advise.

I think you need to consider what is it you want to get from the situation:

1. Was leaving the company something that you were considering prior to the company raising the prospect of an SA?
2. What is the situation with regard to your position given that the furlough scheme is being replaced by the JSS from tomorrow?
3. Do you in fact want to stay working at the company?

I know this may not have answered your question but it may provide somethings for you to think about which may help you work out how you want to respond to the situation.

[Andy1111]

Thank you very much for your very detailed reply. Your answer has provided many answers. Thanks again.