If you have been absent from work due to illness for a prolonged period and your employer has offered you a Settlement Agreement, you may be feeling uncertain about what this means and whether your employment is coming to an end.

Settlement Agreements are commonly used where an employee has been on long-term sickness absence and there is uncertainty about when, or whether, they will be able to return to work.

Whilst this can be an emotional and stressful time, receiving a Settlement Agreement does not necessarily mean your employer has acted unfairly, nor does it mean you should automatically accept the offer.

Before making any decision, it is important to understand your legal rights, the options available to you and whether the proposed agreement represents a fair outcome.

Why has my employer offered me a Settlement Agreement?

There are many reasons why an employer may propose a Settlement Agreement during a period of long-term sickness absence.

For example, they may:

• Believe you are unlikely to return to work in the foreseeable future.
• Need greater certainty for workforce planning.
• Be considering ending your employment on capability grounds.
• Wish to avoid a lengthy capability process.
• Want to reach an agreed outcome that provides certainty for both parties.
• Seek to reduce the risk of future legal claims.

In many cases, a Settlement Agreement provides an opportunity for both employer and employee to agree the terms upon which the employment relationship will come to an end.

Can my employer dismiss me because I am ill?

Possibly.

In some circumstances, an employer may be entitled to dismiss an employee whose illness means they are no longer able to carry out their role.

However, employers are generally expected to act reasonably before reaching that decision.

This may include:

• Obtaining appropriate medical evidence.
• Consulting with you about your health and prognosis.
• Considering whether you are likely to return to work.
• Assessing whether reasonable adjustments should be made.
• Considering suitable alternative roles within the organisation.
• Following a fair capability procedure.

Whether your employer has acted fairly will depend on the circumstances of your case.

What if I have a disability?

Some long-term health conditions may amount to a disability under the Equality Act 2010.

If this applies to you, your employer may have additional legal obligations, including considering reasonable adjustments that could help you remain in work.

Examples might include:

• Adjustments to your working hours.
• Changes to your duties.
• Home or hybrid working.
• Specialist equipment.
• A phased return to work.
• Other practical adjustments depending upon your circumstances.

If you believe your health condition may amount to a disability, it is particularly important to obtain legal advice before signing a Settlement Agreement.

Can I negotiate a better Settlement Agreement?

Often, yes.

Where an employer wishes to avoid continuing a capability process or wishes to reach an agreed conclusion, there may be scope to negotiate.

Depending upon your circumstances, discussions may include:

• The financial settlement.
• Notice pay.
• Holiday pay.
• Pension arrangements.
• An agreed employment reference.
• Your leaving date.
• Payment of legal fees.
• Other practical arrangements that assist your transition.

The opportunities for negotiation will depend upon both your legal position and the circumstances leading to the Settlement Agreement.

What if I want to return to work?

Receiving a Settlement Agreement does not necessarily mean you have no alternative.

If you believe you are capable of returning to work, either now or in the near future, you may wish to explore:

• A phased return.
• Reasonable adjustments.
• Redeployment to another role.
• Flexible working arrangements.
• Continuing the capability process rather than accepting the Settlement Agreement.

Before deciding whether to sign, it is sensible to consider whether returning to work remains a realistic option.

Should I accept the Settlement Agreement?

Every case is different.

Before making your decision, it is important to consider:

• Whether the financial package is fair.
• Whether your employer has followed a reasonable process.
• Whether your health condition may be legally protected.
• Whether negotiation could improve the agreement.
• Your future employment plans.
• Your financial circumstances.

Once signed, a Settlement Agreement will usually prevent you from bringing most employment-related claims covered by the agreement.

Obtaining independent legal advice before signing is therefore essential.

How Pepperells can help

Our specialist Employment Solicitors regularly advise employees who receive Settlement Agreements during periods of long-term sickness absence.

We’ll:

• Review your Settlement Agreement.
• Explain your legal rights.
• Assess whether your employer appears to have followed a fair process.
• Consider whether your health condition may give rise to additional legal protections.
• Advise whether the financial package appears reasonable.
• Negotiate improved terms where appropriate.

Our advice is clear, practical and focused on helping you make the decision that is right for your circumstances.

Looking ahead

Long-term illness can create uncertainty for both employees and employers.

Whether your priority is returning to work, securing financial certainty or moving on to a new opportunity, understanding your legal position is the first step towards making an informed decision.

A carefully negotiated Settlement Agreement can often provide reassurance and certainty at what can be a particularly difficult time.

Speak to a Specialist Solicitor

If you’ve been offered a Settlement Agreement whilst on long-term sickness absence, Pepperells can help.

Our specialist Employment Solicitors will explain your legal rights, assess the fairness of your employer’s approach and advise whether accepting, negotiating or declining the agreement is likely to be in your best interests.

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