There are legal formalities which must be abided by to ensure the settlement agreement is legally binding.

• It must be in writing.

• It has to relate to the particular complaint.

• The employee must have had independent legal advice from a solicitor regarding the terms of the agreement. This comes from the Employment Rights Act 1996 and states that the agreement must identify the independent advisor.

• When the legal advice is given there has to be either a contract of insurance or professional indemnity insurance which covers the risk of a claim by an employee in respect of some loss which comes about as a direct result of the advice.

• The person giving the legal advice must be identified by the agreement.

• It must also state that all conditions regulating settlement agreements are satisfied.

The employee should bear in mind that it is only in a valid settlement agreement that employees can waive the right to claim for unfair dismissal or discrimination.

A settlement agreement might be declared invalid if it is based upon a misrepresentation. Therefore, it may be invalid if the employer deliberately misled the employee into signing a settlement agreement which they knew to be untrue and, if so, the employee may well be able to go ahead with plans to make a claim for unfair dismissal. A recent case, involving Industrious Ltd v Horizon Recruitment Ltd, demonstrates that misrepresentation would potentially make a settlement agreement invalid.