Can your employer offer you a settlement agreement while you are off sick?
Yes, your employer can offer you a settlement agreement while you are off sick, including during long-term sickness absence. There is no legal restriction preventing an employer from proposing a settlement agreement simply because you are absent from work due to illness.
A settlement agreement is a legally binding contract that allows an employer and employee to resolve specified employment claims, often in return for a financial payment. It may also provide for employment to end on mutually agreed terms.
Employers sometimes propose settlement agreements where an employee has been absent due to illness for an extended period, where there are concerns about their ability to return to work, or where workplace difficulties have affected the employment relationship.
However, you are not legally required to accept a settlement agreement simply because your employer has offered one. You can reject the proposal, request changes to the terms or seek independent legal advice before deciding how to proceed.
An employer should not subject you to improper pressure to accept an agreement, particularly where your health may affect your ability to consider the proposal or participate in negotiations.
Can you be dismissed while on sick leave instead of accepting a settlement agreement?
Being on sick leave does not automatically prevent your employer from dismissing you. However, any dismissal must comply with the relevant employment law requirements.
Where an employee’s illness affects their ability to carry out their role, an employer may consider dismissal on capability grounds. Under section 98 of the Employment Rights Act 1996, capability is a potentially fair reason for dismissal.
However, an employer should generally take reasonable steps to understand the employee’s medical circumstances before deciding whether dismissal is appropriate. This may include obtaining relevant medical evidence, consulting with the employee, considering the likely duration of their absence and exploring whether a return to work is possible.
Where an employee has a disability within the meaning of the Equality Act 2010, the employer may also be required to make reasonable adjustments. These could include changes to working hours, duties or working arrangements, depending on the circumstances.
A dismissal connected to disability-related sickness absence may give rise to a discrimination claim if the employer cannot establish a lawful justification or has failed to comply with its duty to make reasonable adjustments.
Employees who qualify for unfair dismissal protection may also be able to challenge a dismissal where their employer has not followed a fair process or acted reasonably.
Refusing a settlement agreement does not, by itself, give your employer a lawful reason to dismiss you. If you reject the offer, your employer must still comply with its legal obligations when deciding what happens next.
How much compensation should you receive in a settlement agreement while off sick?
There is no fixed amount of compensation that an employer must offer when proposing a settlement agreement during sickness absence. The amount you may receive will depend on your individual circumstances, including your length of service, salary, contractual entitlements, the reasons for your absence and whether you have any potential employment claims.
A settlement agreement may include an additional compensation payment in return for agreeing to end your employment and settle certain employment claims. It may also cover payments you are already entitled to receive, such as notice pay, outstanding holiday pay, unpaid salary, statutory or contractual sick pay, and any bonuses or benefits payable under your employment contract.
It is important to distinguish between payments your employer is legally required to make and any additional compensation offered as part of the settlement. These should be considered separately when assessing whether the proposed financial package is reasonable.
If you are currently receiving sick pay, the proposed termination date could affect how much further sick pay you receive. Your entitlement to notice pay may also depend on the statutory rules and the terms of your employment contract.
The circumstances surrounding your sickness absence may also affect negotiations. For example, if your employer has failed to follow a fair procedure, has not considered reasonable adjustments or may have discriminated against you because of a disability, you may have grounds to negotiate a higher settlement payment.
However, having a potential employment claim does not automatically mean you are entitled to a particular amount of compensation.
Before accepting a settlement agreement, you should understand what your employer already owes you, which legal claims you would be giving up and whether the additional compensation offered fairly reflects your circumstances.
Do you need a solicitor for a settlement agreement while on sick leave?
To validly waive the statutory employment claims covered by a settlement agreement, you must receive advice from a suitably qualified independent adviser on the terms and effect of the agreement, particularly its effect on your ability to pursue those claims.
This advice is commonly provided by an independent solicitor, although certain other authorised advisers may also satisfy the legal requirements.
A solicitor can review the proposed agreement, explain the rights you would be giving up and identify any terms that may require clarification or negotiation.
If you are off sick, obtaining legal advice may be particularly important where the agreement affects your entitlement to sick pay, notice pay, employment benefits or potential disability discrimination claims.
Your adviser can also consider whether the proposed termination date and financial package reflect your contractual entitlements and whether additional compensation may be appropriate.
Employers often contribute towards the cost of independent legal advice, although there is generally no legal obligation for them to do so.
You should also be given a reasonable opportunity to consider the proposed agreement. The Acas Code of Practice on Settlement Agreements recommends allowing employees at least 10 calendar days to consider the formal written terms and obtain independent advice, unless the parties agree otherwise. This is guidance rather than a mandatory statutory minimum period.
If your illness or disability affects your ability to review the agreement or participate in discussions, you can request additional time or appropriate adjustments to the process.
Pre-Law provides employment law advice to individuals who have been offered settlement agreements during sickness absence, including employees experiencing long-term illness, workplace disputes or uncertainty about returning to work.
Obtaining advice before signing can help you understand the proposed terms, assess your legal position and decide whether accepting or negotiating the agreement is appropriate.
