Chris Brunt is a Gibraltar employment lawyer, a barrister and an acting solicitor. Call me on Gibraltar 200 73900 or email me at: chris.brunt@phillips.gi who acts principally for Employees.
Negotiating Your Gibraltar Settlement Agreement – You Have Been Offered a Settlement Agreement — Should You Accept It?
Your employer has offered you a sum of money to leave your employment. Perhaps you have been told your position is redundant. Perhaps there has been a dispute at work. You may have raised a grievance, be facing disciplinary or capability proceedings, or simply have been approached with a proposal for an agreed exit.
Or perhaps the employment relationship has already ended and you are considering — or have already commenced — a claim in the Gibraltar Employment Tribunal.
Whatever the circumstances, you may now have an offer in front of you.
Should you accept it?
Before answering that question, there is another question worth asking:
Could you negotiate a better deal?
The fact that your employer has offered £5,000, £10,000 or £20,000 does not necessarily mean that this represents the true value of the proposed settlement. Nor does it necessarily mean that the amount offered is all that your employer is prepared to pay.
The starting point should be to understand what you are already entitled to, what legal rights or potential claims you are being asked to give up, what those claims might realistically be worth and what negotiating leverage you may have.
That is where obtaining Gibraltar employment law advice before accepting the offer can be particularly valuable.
A Settlement Agreement should not simply be regarded as a document which needs to be checked and signed. In appropriate circumstances, it is a negotiation.
And there may only be one opportunity to get that negotiation right.
The first offer is not necessarily the final offer
An employer may present a proposed Settlement Agreement accompanied by a financial offer and a deadline for acceptance.
It is important to understand what that offer actually represents.
Some payments may simply be sums to which you are already entitled — for example, outstanding salary, accrued holiday pay, notice pay or, where applicable, statutory redundancy pay.
Those payments should be distinguished from any additional or ex gratia payment being offered in return for you agreeing to settle potential claims against your employer.
That distinction can be important.
For example, an employer might describe the overall value of an exit package as £20,000. But if a substantial proportion of that sum represents notice pay, accrued holiday, redundancy pay or other sums which would have been payable anyway, the amount actually being offered in return for settling your potential claims may be considerably smaller.
An offer which initially looks generous can therefore appear rather different once the figures are properly analysed.
What are your potential claims worth?
Before negotiating, it is usually necessary to understand what the alternative to settlement might be.
That does not mean that every employee should threaten Employment Tribunal proceedings.
It means understanding your legal and commercial position before deciding whether the employer’s offer represents a reasonable settlement.
Depending upon the circumstances, that may involve considering questions such as:
- Why is your employer proposing to terminate your employment?
- If redundancy is relied upon, is there a genuine redundancy situation?
- Has a fair redundancy procedure been followed?
- Have you been properly consulted?
- Was the selection pool appropriate?
- Were fair and objective selection criteria used?
- Were appropriate alternatives to dismissal considered?
- Could you have a claim for unfair dismissal?
- Is there a potential discrimination, harassment or victimisation claim?
- Has your employer breached your contract?
- Are there outstanding wages, notice pay, holiday pay, commission or other payments?
- Have you raised a grievance or complaint which may be relevant?
- What compensation might realistically be recoverable if the dispute proceeded to the Gibraltar Employment Tribunal?
The answers to those questions may materially affect your negotiating position.
A settlement of £5,000 might be an excellent outcome in one case and an inadequate one in another.
The figure cannot sensibly be considered without understanding the case behind it.
Negotiating from a position of knowledge
Effective negotiation is not simply a matter of asking the employer for more money.
There should ideally be a reason why the employer should consider paying more.
The objective is to identify that reason — or, more accurately, the areas of legal and commercial risk which may provide negotiating leverage.
For example, there may be weaknesses in the employer’s redundancy procedure, an inappropriate selection pool, inconsistent treatment compared with colleagues, inadequate consultation, procedural shortcomings in disciplinary proceedings or facts supporting a potential Employment Tribunal claim.
Conversely, there may be weaknesses in the employee’s position which also need to be recognised.
This is important because sensible negotiation involves assessing both sides’ risk.
A Gibraltar employment lawyer advising upon a Settlement Agreement should therefore be able to do more than simply read the agreement and explain what its clauses mean.
Where appropriate, the circumstances leading to the proposed termination should also be considered so that the employee can understand whether there is a basis upon which to negotiate.
There is more to negotiate than money
Although the financial settlement is understandably important, a good exit package may involve considerably more than the headline figure.
Depending upon your circumstances, negotiations might include:
Notice pay and garden leave
What happens to your contractual notice entitlement? Will you work your notice, receive a payment in lieu or remain employed on garden leave?
Accrued holiday and outstanding payments
You should establish which sums have already been earned and are payable irrespective of the settlement.
Bonus and commission
The termination date can sometimes have significant consequences for bonuses, commission, share schemes or other incentive arrangements.
Reference
An agreed reference can be extremely valuable, particularly where the circumstances surrounding your departure might otherwise create uncertainty when applying for another position.
Reason for leaving and announcements
It may be possible to agree how your departure will be described both internally and externally.
Confidentiality and non-disparagement
These clauses should be examined carefully. Where appropriate, consideration should be given to whether obligations should be mutual.
Restrictive covenants
Existing contractual restrictions may affect where you can work next or whether you can approach particular customers or clients. In an appropriate case, their removal or modification may itself be something worth negotiating.
Legal costs
Consideration can also be given to whether the employer should make a contribution towards the employee’s legal costs associated with the Settlement Agreement. In Gibraltar it is usual for an employer to contribute £500 towards your legal costs for advising you on the terms om the agreement that you sign. If your legal fees exceed this, you would be responsible of course to bay the balance.
The best settlement is therefore not always simply the one containing the largest cheque.
The overall package matters.
Redundancy does not necessarily mean there Is nothing to negotiate
A common misconception is:
“My job really is redundant, so I have no negotiating position.”
That is not necessarily correct.
The existence of a genuine redundancy situation does not automatically mean that the employer has followed a fair procedure or that the proposed financial package is appropriate.
The selection pool, selection criteria, consultation process, consideration of alternative employment and the particular circumstances surrounding the employee’s selection may all require examination.
There is also a commercial dimension.
An employer undertaking a restructuring may want certainty, a clean departure and protection against future litigation.
That certainty may itself have value.
Consequently, there can sometimes be scope for negotiation even where the underlying redundancy is genuine.
What if you have already started an Employment Tribunal claim?
It is not too late to negotiate.
Settlement can take place before proceedings commence, during proceedings or even relatively close to a final hearing.
Once proceedings have begun, both sides may have additional reasons for considering settlement.
Litigation involves risk.
However strongly somebody feels about their case, there is rarely a guaranteed outcome. Tribunal proceedings can also involve considerable preparation, evidence, management time, legal expense and uncertainty.
A Claimant should therefore compare an offer not simply with the amount claimed in the proceedings, but with the realistic range of possible outcomes if the case continues.
That can require consideration of:
- the prospects of establishing liability;
- the value of the claim if successful;
- potential reductions in compensation;
- mitigation of loss;
- evidential difficulties;
- litigation risk; and
- the value of obtaining a certain financial outcome now rather than pursuing an uncertain outcome later.
A claim which might theoretically produce a substantial award is not necessarily worth that amount as a settlement.
Equally, an employer facing a credible claim may be prepared to pay a sensible sum to remove the risk altogether.
Good settlement negotiation involves identifying where those competing risks meet.
Should you make the first counter-offer?
There is no universal answer.
Sometimes a carefully reasoned counter-offer is appropriate. In other cases, further information should be obtained before putting forward a figure.
How much to ask for also requires judgment.
An unrealistically high demand can sometimes make productive negotiation more difficult.
But immediately accepting the employer’s first proposal may mean giving up an opportunity to achieve a better outcome.
The objective should not simply be to demand the highest possible figure.
It should be to establish a credible and defensible negotiating position and use it effectively.
Be careful about deadlines
Settlement Agreements are sometimes accompanied by relatively short deadlines.
A deadline should be taken seriously, but you should not allow it to prevent you from obtaining advice or properly considering what is being proposed.
Depending upon the circumstances, it may be appropriate to ask the employer for additional time.
There is, however, another important deadline to consider.
If you have or may have a claim in the Gibraltar Employment Tribunal, you should not assume that ongoing settlement discussions automatically protect or extend the applicable time limit for bringing proceedings.
Settlement negotiations and Tribunal limitation periods are separate matters.
Missing an applicable limitation deadline can have serious consequences.
Why taking advice early can matter
There can be a considerable difference between obtaining legal advice after the financial terms have effectively been agreed and obtaining advice before or during the negotiation.
If the figure has already been agreed, the opportunity to negotiate it may have been substantially reduced.
Early advice allows your position to be assessed before important decisions are made.
That can include:
- reviewing the proposed Settlement Agreement;
- identifying your existing contractual and statutory entitlements;
- separating those entitlements from the genuine settlement payment;
- identifying potential Employment Tribunal claims;
- assessing the strengths and weaknesses of those claims;
- considering their realistic financial value;
- identifying the employer’s potential legal and commercial risks;
- identifying non-financial terms worth negotiating; and
- where appropriate, negotiating with the employer or its lawyers on your behalf.
The purpose is not necessarily to turn every proposed departure into a dispute.
Often, the opposite is true.
Good negotiation can enable employer and employee to bring the relationship to an end quickly, professionally and with certainty.
But the employee should understand what they are giving up and what they should reasonably seek in return.
How I can help
If you have received a Settlement Agreement, redundancy proposal or other offer to leave your employment, my role can go considerably further than simply checking the wording of the agreement.
I can consider the circumstances surrounding your proposed departure and advise you upon your underlying employment law position.
This may involve:
- reviewing the Settlement Agreement and financial proposal;
- reviewing your contract of employment and other relevant documents;
- identifying what your employer already owes you;
- considering whether you may have potential claims against your employer;
- advising upon the strengths and weaknesses of those claims;
- considering what compensation might realistically be recoverable before the Gibraltar Employment Tribunal;
- assessing whether the employer’s settlement proposal reasonably reflects those risks;
- advising upon an appropriate negotiating strategy; and
- where instructed, negotiating directly with your employer or their lawyers on your behalf.
Trying to improve the settlement
Where there is a proper basis for doing so, I can seek to negotiate an improved overall package.
That may include seeking:
- an increased settlement or ex gratia payment;
- the correct payment of notice, holiday, redundancy and other contractual entitlements;
- appropriate treatment of bonuses, commission or other benefits;
- an agreed reason for leaving;
- an agreed internal or external announcement;
- amendment or removal of restrictive covenants;
- appropriate confidentiality and non-disparagement provisions; and
- a contribution towards your legal costs.
Every case is different.
There is no guarantee that an employer will increase an offer simply because it is challenged. Equally, there may be cases where the original offer is already reasonable and accepting it is the sensible course.
The important point is to make that decision after understanding your legal position, rather than simply assuming that the employer’s first figure must be accepted.
Already involved in an Employment Tribunal claim?
I can also advise Claimants who have already commenced, or are considering commencing, proceedings in the Gibraltar Employment Tribunal.
If your employer makes a settlement offer during the proceedings, I can advise upon that offer by considering the merits of your case, its potential value, the risks of continuing and the certainty offered by settlement.
Where appropriate, I can also conduct settlement negotiations on your behalf.
Before you say yes
If an employer has put an offer in front of you, there can be a natural temptation to focus on one question:
“How much is my employer offering me?”
There is another question which may be more important:
“How much should I reasonably be seeking?”
The answer depends upon your employment rights, your contractual entitlements, the circumstances surrounding your departure, the potential claims you may be giving up and the risks faced by both sides.
Once the agreement is signed, the negotiation is over.
If you have received a Settlement Agreement, redundancy proposal or other offer to leave your employment — or you are considering settling an existing or potential Gibraltar Employment Tribunal claim — you can contact me before responding to the offer.
I can assess your position, advise you upon the offer and, where appropriate, negotiate on your behalf.
The objective is simple: to make sure that before you sign, you know what you are entitled to, what you are giving up and whether there is a realistic opportunity to achieve a better settlement.
Contact Chris Brunt: Call me for an initial discussion about your particular circumstances at Phillips Barristers and Solicitors, 292 Main Street, Gibraltar, or email me at chris.brunt@phillips.gi or call me on 200 73900
All opinions are my own and are provided for information only and do not constitute legal advice. Please note that the information and any commentary on Gibraltar law contained in this article are provided free of charge for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but I do not accept responsibility for its accuracy and or for any consequences of relying on it. The information and commentary do not, and are not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal legal advice about your case or matter and not to rely on the information or comments on this site https://www.employmentlawgibraltar.com
