Using a Settlement Agreement

Find out how a settlement can save you the time and expense of litigation when you have a dispute with an employee that you've fired.

If you have a dispute with an employee that you've fired and want to avoid possible litigation, consider entering into a settlement agreement with the worker. Settlements can be cheaper than litigation. They also allow you to avoid the distractions and disruptive effects of a lawsuit and protect your business's reputation.

The scope of any settlement depends on the strength of the employee's case. Your attorney can advise you about what could happen if the case were to go to trial and help you determine if a settlement is the best course of action. Some common bargaining chips used in settlement agreements include:

• A severance payment
• Continuation of benefits for a fixed period of time
• Vesting of any unvested stock options
• Payment for outplacement services
• A favorable reference letter
• Reimbursement for moving or relocation expenses

Keep in mind that settlement agreements are negotiable. Before you agree to give a former employee certain benefits, the employee should agree to conditions preventing them from defaming or damaging your company. To protect yourself from future lawsuits and damages, consider including the following stipulations in your settlement agreement:

• A release by the employee of all claims, known or unknown, that they have against the company, its officers and its employees related to the worker's employment and termination.

• An agreement that the employee will not make disparaging remarks about the company, its officers and its employees.

• A commitment to keep the company's proprietary information confidential.

• An agreement not to solicit any employees or customers of the company for at least one or two years.

You can also protect your company against legal disputes with employees by following clear guidelines for hiring and firing that respect all employment laws. Find out where you can get information on the legal steps in firing an employee and make sure that all managers learn these parameters. One basic step toward compliance with employment laws is to post all required workplace posters.

Find additional employment law information and tips on OSHA regulations at AllBusiness.com.

Copyright © 1999 - 2007 AllBusiness.com, Inc. All rights reserved.