How to Negotiate a Settlement Agreement

From the final amount to the terms of the contract, we look at how you can successfully negotiate a settlement agreement you’re happy with.

If you are in the process of bringing a legal claim against your employer, at some point, it is likely your employer will offer a settlement agreement.

Before you sign anything, you need to understand how the settlement agreement will affect you. A settlement can offer a fair resolution, but it can also have negative outcomes.

Here’s what you need to know about settlement agreements and how to successfully negotiate a settlement with your employer.

What’s the Goal of a Settlement Agreement?

When it comes to disputing claims between an employee and their employer, a settlement agreement is a way of bringing negotiations to a close. A settlement agreement is a contract between employer and employee.

This contract is a way to resolve issues between an employer and employee by agreeing to certain terms. It is a way to avoid taking a case to court.

Either an employee or an employer can suggest a settlement agreement. This can happen either during or following employment.

Typically, the agreement prevents the employee from bringing future claims against the employer in exchange for compensation. It can also be used to terminate the employee’s employment.

What Types of Claims Apply in a Settlement Agreement?

The goal of most employers in asking an employee to sign a settlement agreement is to prevent the employee from bringing further claims against them.

When you sign the agreement, you waive your rights to bring any claims against your employer in the future. Thus, settlement agreements tend to account for every possible claim.

You should assume that when you sign a settlement agreement, it effectively prevents you from bringing legal action against your employer for anything that has transpired between you and them.

However, there are exceptions. Some types of claims can’t get waived by a settlement agreement. For example, if you sustained an injury at work but aren’t aware of the injury at the time you sign the agreement.

Perhaps you were unknowingly exposed to lead paint at work and only learn of it many years later. The settlement agreement you signed before knowing about the lead paint would not prevent you from taking legal action.

Am I Required to Sign a Settlement Agreement?

Your employer may pressure you to sign, but you are under no obligation to sign a settlement agreement. It is entirely up to your discretion whether you sign the agreement or not.

It is in your best interest to take your time, consider the consequences, and think very carefully before signing anything.

How To Negotiate a Settlement

If your employer has offered a settlement or you believe they are close to asking you to sign a settlement agreement, you need to know how to proceed.

Here are some things you can do to strengthen your position and negotiate the terms of a settlement claim.

Seek Independent Legal Advice

You are legally required to seek independent legal advice before you sign a settlement agreement. It is also in your best interest to do so. A legal expert can advise you on the potential risks and help you get a better outcome.

Make a Counter-Offer

A first offer is rarely ever a final offer. Your employer will try to offer you a low settlement first, but they are most likely leaving themselves room to negotiate.

If the offer your employer gives you seems unfair, make a counter-offer. This counter-offer could be for a larger settlement, or it could incorporate other agreements.

You may want to include an agreement for a future reference from your employer. Or you may want to minimize the restrictions regarding certain covenants your employer wishes to make.

Some employers will try to play hardball, but in general, you should not worry that trying to get a better deal will cause them to take the original deal off the table.

If you are worried about making ends meet while in the process of settling your claim, consider applying for a pre-settlement lawsuit loan. These loans are available for many different types of cases and can help tide you over.

Avoid Resigning

We cannot emphasize enough how important it is to get independent legal advice before signing a settlement agreement. Equally important is that you do not resign from your job before you finish negotiations.

Resigning can have a negative impact on your ability to negotiate. It can make it harder to receive a fair and just settlement for your case. Remaining employed can pressure your employer into offering a better settlement.

In addition, if you do resign, the process of getting your employer to consider a settlement gets drawn out and becomes more expensive for all parties involved.

Rather than resign, raise a formal grievance. This will force your employer to deal with the issue at hand and move your negotiations along more quickly. It strengthens your argument by drawing attention to their shortcomings.

If your employer ignores the grievance, it reinforces your position and strengthens your legal claims.

Moreover, having to deal with a formal grievance takes up a lot of your employer’s time. They would much prefer to negotiate a settlement than have to deal with a grievance.

Things To Consider Before Signing a Settlement Agreement

Consult your lawyer and discuss the possible consequences of signing a settlement agreement. Here are some things to consider.

Are you being offered at least the same amount you would get if you did not sign the settlement agreement?

What non-monetary benefits would you receive if you signed the agreement?

Will your employer agree to give you a reference in the future?

What are you getting as payment in exchange for giving up your right to make any future claims against your employer?

What are the consequences of not signing the settlement agreement?

Will your employer initiate disciplinary action against you if you refuse to sign the settlement agreement?

Do you have other negotiation options that would guarantee a successful outcome?

These are just a few of the questions you should be considering before signing a settlement agreement. A good lawyer will help you consider all the options before making your decision.


The best thing you can do when trying to negotiate a settlement with your employer is to seek independent legal advice. Make sure you understand the entirety of any settlement agreement your employer offers before signing.

If you are concerned about your financial stability while waiting for your case to resolve, you can apply for a non-recourse lawsuit settlement advance. Start a free case evaluation now to see if you qualify.


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