In today’s email, I gave you some tips on drafting an effective settlement agreement. One important issue to consider is whether there are additional terms that you want in the agreement to suit the business. Here are some ideas for clauses you might want to include:

A non-disparagement clause. You don’t want the employee to bad mouth the business once they have left. Although these clauses are difficult to enforce, they are a handy deterrent.

A clause restating or creating post-termination restrictions and confidentiality requirements. If the employee’s contract doesn’t have restrictions or they are not very good, now is your chance to put something strong in place. You will need to offer some money in return, which is taxable.

A return of company property clause. This involves the employee warranting that they have returned everything belonging to the business.

A warranty that the employee hasn’t yet secured a new job. This might be important if you framed your offer on the assumption that the employee would be out of work for a time. This allows you to sue to recover the overpayment if you discover the employee lied to you.

A set-off provision. This would state that part of the settlement sum can be set off against earnings in a new job if the employee gets a new job within a certain time.

A warranty that the employee hasn’t misbehaved or done something which, had you known about it, would have changed your approach to negotiations (or given you the right to dismiss them fairly).

A tax indemnity covering any ex-gratia payment. You will be paying the employee a certain sum that you both believe is payable tax free. If you’re wrong, you want the employee to pick up the tab for any tax due.

A counterpart clause allowing you, the employee and the legal adviser to sign different physical versions of the agreement which, when put together, have the effect of one fully signed whole agreement. This is for practical reasons, as it can be a nightmare arranging for a single physical copy of an agreement to be signed.

A clause stating that this forms the entire agreement between the parties and supersedes any previous agreement. This is important if there has been a lot of ‘back and forth’ in the discussions. You don’t want the employee to bring up something offered months previously and claim to be entitled to it.

A clause stating that the employee agrees to keep confidential: