One of the most important aspects of a settlement agreement is understanding exactly which claims you are waiving. A settlement agreement is only effective in waiving specific, identified claims — a general waiver of 'all claims' is not sufficient under English law. This guide explains the main categories of claim that settlement agreements typically cover.
The Legal Requirement: Specific Identification
Under section 203 of the Employment Rights Act 1996, a settlement agreement must specifically identify the claims being waived. This means the agreement should list each type of claim by reference to the relevant legislation — for example, 'any claim under the Equality Act 2010' or 'any claim for unfair dismissal under the Employment Rights Act 1996'. A blanket waiver of 'all claims' is not legally effective.
Unfair Dismissal
The most common claim waived in a settlement agreement is unfair dismissal under the Employment Rights Act 1996. To bring an unfair dismissal claim, an employee generally needs two years' continuous employment. Compensation is capped at the lower of 52 weeks' pay or £115,115 (2024/25). If you have a strong unfair dismissal claim, this significantly increases your negotiating position.
Discrimination Claims
Claims under the Equality Act 2010 — covering age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation — are frequently included in settlement agreements. Unlike unfair dismissal, discrimination compensation is uncapped and can include awards for injury to feelings. These claims can be particularly valuable.
Whistleblowing
If you have made a protected disclosure under the Public Interest Disclosure Act 1998 — commonly known as whistleblowing — and suffered a detriment as a result, this is a separate category of claim with no cap on compensation. Settlement agreements in whistleblowing cases require careful drafting to ensure the waiver is effective and that any confidentiality obligations do not prevent you from making further protected disclosures.
Breach of Contract and Unpaid Wages
Settlement agreements commonly include waivers of breach of contract claims — for example, unpaid bonuses, commission, or benefits — and claims for unlawful deduction from wages. These contractual claims are often the most straightforward to value and can form a significant part of the overall settlement.
Claims That Cannot Be Waived
Not all claims can be waived in a settlement agreement. Personal injury claims that the employee is not aware of at the time of signing cannot be waived. Accrued pension rights cannot be waived. Claims under the Working Time Regulations for unpaid holiday pay that have already accrued may also survive the agreement in certain circumstances. Your solicitor will advise on any claims that fall outside the scope of the waiver.
Future Claims
A settlement agreement can only waive claims that have already arisen — it cannot waive claims that arise after the agreement is signed. If your employer subsequently acts in a way that gives rise to new claims, those claims are not covered by the settlement agreement.
Understanding what you are waiving is fundamental to assessing whether a settlement offer is fair. PDA Law will explain every claim you are giving up and advise on whether the financial offer reflects the value of those claims.