Settlement Agreements and Furlough

Settlement Agreements and Furlough: What You Need to Know

The COVID-19 pandemic has had a significant impact on businesses all over the world. One of the most common strategies that employers have implemented to reduce costs is to furlough employees. In some cases, this may result in the need for a settlement agreement. In this article, we will explore what settlement agreements are, how they relate to furlough, and what you should consider if you are an employer or employee involved in this situation.

What is a Settlement Agreement?

A settlement agreement is a legally binding document between an employer and employee that sets out the terms of a settlement. This type of agreement is typically used in situations where an employee is leaving their job and there are potential claims against the employer, such as unfair dismissal or discrimination. A settlement agreement is an effective way for both parties to resolve disputes and avoid legal action.

How Does Furlough Affect Settlement Agreements?

Furlough is a temporary leave of absence from work that an employer may offer to employees when there is a reduction in business activity. If an employee is on furlough and their role is subsequently made redundant, there may be a need for a settlement agreement. In this situation, the settlement agreement would set out the terms of the employee`s departure and any compensation they would receive. It is important to note that if an employee is on furlough, they must continue to receive their furlough pay until the end of the furlough period.

What Should Employers and Employees Consider?

If you are an employer or employee involved in a settlement agreement related to furlough, there are several factors to consider:

1. Redundancy pay – If an employee is made redundant while on furlough, they may be entitled to a redundancy payment based on their length of service and pay. This should be outlined in the settlement agreement.

2. Furlough pay – If an employee is on furlough, their employer must continue to pay them according to the furlough scheme until the end of the furlough period. This should also be outlined in the settlement agreement.

3. Legal advice – It is essential that both parties seek independent legal advice before signing a settlement agreement. This will ensure that the agreement is fair and legally binding.

4. Confidentiality – Settlement agreements are often confidential, which means that both parties are prohibited from discussing the terms of the agreement with anyone outside of their legal advisors.

In conclusion, settling a furlough-related redundancy with a settlement agreement is a common practice, as it allows both employers and employees to avoid legal action and resolve disputes. If you are involved in this situation, it is important to seek legal advice and carefully consider the terms of the agreement. By doing so, you can ensure a fair and legally binding resolution that protects the interests of both parties.