How do settlement agreements work in the agricultural sector?  

Farming is a demanding business – especially in these financially troubled times – and you need every staff member to be working at the top of their game. If you have an employee who is frequently late or calling in sick, or who is stirring up trouble with constant complaints, it can have an effect on the wellbeing of your livestock, the morale of other workers, and on your profit margin.

Strict UK employment laws usually restrict your ability to simply sack a troublesome full-time employee without a long, arduous legal process. However, if you have an employee who is not performing as they should, or has raised a troublesome grievance in the workplace, a settlement agreement can be a useful way of terminating their employment, or resolving a dispute, without fear of repercussions, as Kalpesh Nakeshree, Head of Employment Law at Ware & Kay in York, Wetherby & Malton, explains.

A settlement agreement (formally known as a compromise agreement) is a legally binding contract between an employer and employee in which the terms of the employee’s termination of employment, or the means of settling a dispute, are set out.

It will usually involve you agreeing to pay the employee a tax-free sum of money to go away quietly or to cease pursuing their complaint. It will also set out any other benefits they might be entitled to, such as holiday pay, redundancy pay, pension contributions, and notice pay. For a senior employee, such as a farm or production unit manager, this would also need to include any bonuses and shares.

In exchange, they agree not to exercise their statutory right to sue you in a court or tribunal for breach of contract, unfair dismissal, or discrimination.

A settlement agreement will also usually include a confidentiality clause to ensure that the terms of the agreement are kept private, as well as a pledge from you that you will supply the employee with a reference. You will need to draft and agree the exact wording of the reference as part of the process to provide certainty.

Depending on the type of work involved, a restrictive covenant may also be included to prevent the employee joining a direct competitor within an agreed time frame, getting a job which might harm you if the settlement agreement was disclosed, or poaching your staff, suppliers or clients. This would be appropriate if a senior member of your team left, such as your farm manager.

In addition, the agreement will set out what will happen if the agreement is breached by either party, and can allow you to protect your intellectual property by making it clear that you retain the rights to any product or process that your employee invented while they worked for you – such as an award winning cheese or ice cream.

Under section 203 of the Employment Rights Act 1996, the agreement must be in writing and relate to a specific complaint or proceedings. The employee must have received independent legal advice about the terms and effect of the proposed agreement, and the impact it would have on their ability to pursue any complaint or proceeding before an employment tribunal. You are not obliged to pay a contribution towards this legal advice, but most employers will do this. The agreement must also state that the conditions under section 203 have been satisfied.

Employees are not obliged to sign a settlement agreement and have every right to negotiate for terms that they are satisfied with. The Acas Code of Practice states that an employee should be given at least 10 calendar days to consider a settlement offer, unless they specifically waive this right. The code is not binding, but if you do not abide by it, you would have to justify why you did not at any future legal proceedings.

How we can help

If you have a troublesome employee and you would like them to leave without the need for a redundancy procedure, a disciplinary process or a prolonged performance management review, or if you need to resolve a dispute quickly and with the minimum of fuss, you should seek advice from our experienced employment law experts.

We will quickly assess whether a settlement agreement is appropriate and, if it is, we will help to negotiate with the employee and draft an agreement that is valid, legally binding and designed to best protect your interests. A settlement agreement is not a one-size-fits device, it needs to be tailored specifically for an individual employee.

For further information, please contact Kalpesh Nakeshree in the employment team on York 01904 716000, Wetherby 01937 583210 or Malton 01653 692247 or email kalpesh.nakeshree@warekay.co.uk