A settlement agreement is a mutually convenient way of an employer terminating the employment of a teacher.
The benefit to the employer is that they can swiftly and quietly remove the teacher from their position and take steps to recruit a replacement. The benefit to the teacher is often a favourable reference and some sort of financial remuneration.
Settlement agreements are increasingly common in the education sector. In the last five years, in my role as a union caseworker, I have helped teachers successfully negotiate their exit on several occasions. Many of those have found themselves subject to capability or disciplinary procedures, but an increasing number simply want to escape the relentless daily grind of what is becoming a thankless task.
In this article I give a brief overview of how and when settlement agreements are used. As you will understand, I cannot go into specific examples. I can, however, discuss some of the key features that seem to appear in every teacher settlement agreement.
As I am based in England this article will primarily focus on the situation in England and Wales. The relevant conditions of service and legislation may well be different in Scotland and Northern Ireland.
When are settlement agreements used?
Certainly in the state sector, most teachers are employed in accordance with a document called the Conditions of Service for School Teachers in England and Wales (the so called Burgundy Book). This document sets out main terms and conditions of employment enjoyed by teachers, which are generally pretty favourable.
One major gripe about the conditions is that teachers can normally only terminate their employment on three occasions during the year - the 30th April (in which case they need to give their employer notice by 28th/29th February); the 31st August (in which case they need to give their employer notice by 31st May); and 31st December (in which case they need to give their employer notice by 31st October). If the teacher misses any of the notice deadlines then theoretically they would need to wait until the next resignation window, which could be a period of up to 6 months if they fall unlucky with the dates.
There are clearly situations where a teacher needs to leave their employment in a far shorter timeframe than that. That might be the case if the teacher has somehow become a disgruntled employee; if they have become subject to some sort of disciplinary or capability proceedings; or if they are on a protracted period of sickness absence. In those situations the employer might be willing to allow the teacher to terminate their employment early by mutual agreement. In these situations a settlement agreement allows the employer to protect their own interests by allowing the teacher to terminate their employment on certain conditions.
What are the terms of a settlement agreement?
A settlement agreement is legally binding on both parties. Entering a settlement agreement will allow a teacher to terminate their employment on the agreement that they waive their rights to make a future claim against the employer at an Employment Tribunal.
It might also include the following terms:
- That the teacher does not make any derogatory comments about the employer, their other employees, their students, or the parents/carers of their students;
- That the teacher does not disclose the contents of the settlement agreement, apart from when they are under a statutory obligation to do so;
- That the teacher withdraws any outstanding grievances or complaints against the employer;
- That the teacher makes arrangements for the return of any property belonging to the employer;
- That the teacher does not return to the employer's premises;
- That the teacher does not engage in employment-related conversations with other employees;
- That the teacher does not make any future subject access or freedom of information requests to the employer.
In return, the employer might agree to the following:
- The teacher's termination of employment on an agreed date;
- To pay the teacher's legal fees in relation to the agreement;
- A termination payment as compensation for loss of the teacher's employment (these payments are typically tax free);
- A payment in lieu of notice (PILON) if the teacher is allowed to terminate their employment before the end of the normal notice period (PILON is taxed at the usual rate);
- An agreed reference for the teacher;
- The teacher having a say on how their departure is announced;
- Not to make any derogatory comments about the teacher and to ensure, as far as reasonably possible, that none of their other employees do either.
Are there any terms that cannot be included in a settlement agreement?
A settlement agreement cannot require a teacher to waive their rights to make a protected disclosure (e.g. blow the whistle) under the terms of section 47B of the Employment Rights Act 1996. This means the teacher could still report any act of criminal wrongdoing or breach of statutory obligation by the employer (or other employees) to the appropriate body.
A settlement agreement cannot require a teacher to waive their rights in relation to any future, unforeseen medical condition directly attributable to their employment. This means a teacher could still make a claim against the employer if it later transpires the school was riddled with asbestos and they develop asbestosis as a result.
A settlement agreement cannot require a teacher to waive their rights in relation to the enforcement of that agreement.
How do you negotiate a settlement agreement?
A teacher's trade union will usually negotiate any settlement agreement on their behalf. The agreement is a two way process - if the teacher is dissatisfied with any of the proposed terms of the agreement they can ask the union to renegotiate them.
Once the wording of the agreement has been finalised, the teacher is obliged to seek independent legal advice about the consequences of entering into it. The union would normally arrange this for the teacher.
How much is a teacher settlement payment?
It depends on the circumstances, but generally speaking the teacher will have greater negotiating power if:
- They would have valid grounds to make a claim at the Employment Tribunal;
- They have knowledge or information which, if it were known to other people, could cause serious reputational damage to the employer;
- They are on sickness absence due to a work-related illness or injury.
It would be fairly typical for the employer to offer two or three months' PILON.
Those teachers in a stronger position might be offered two or three months' termination payment in addition to two or three months' PILON.
Those teachers in the strongest position might be offered something just below what they could reasonably be expected to be awarded by an Employment Tribunal.
What happens if I break the settlement agreement?
A settlement agreement usually includes a clause requiring the repayment of all monies paid in pursuance of the agreement in the event of a breach. The employer could take legal action against the teacher if they failed to make the requirement repayment. The employer would likely decline any future reference requests in relation to the teacher.