If you have been offered a settlement agreement at work, it is common to feel unsure whether you should sign. Settlement agreements are often presented at stressful moments, such as redundancy situations, workplace disputes, or concerns about performance or conduct. A key question employees ask is what happens if they refuse to sign.
In most cases, you do not have to sign a settlement agreement. It is a voluntary agreement. However, refusing to sign does not mean nothing will happen next. Employers usually offer settlement agreements to bring matters to an end with certainty, and if that certainty is not achieved, they may move forward using another formal process.
Do you have to sign a settlement agreement?
No. A settlement agreement is not legally binding unless you sign it and receive independent legal advice. Your employer cannot normally force you to agree to it. You are entitled to time to consider the terms and take advice before deciding.
That said, employers are entitled to make the offer conditional on acceptance. If you do not sign, you will not receive the compensation or other benefits set out in the agreement, and the employer may proceed down a different route.
What happens if you don’t sign?
If you do not sign, the settlement agreement has no legal effect. You keep your right to bring employment claims, and the employer does not obtain a waiver of liability. At that point, the employer will usually decide whether to continue negotiations, improve the offer, or proceed with a formal process such as redundancy, performance management, disciplinary action, or dismissal.
Settlement agreements offered in redundancy situations
Where a settlement agreement is offered in connection with redundancy, refusing to sign does not prevent the employer from proceeding with redundancy in the normal way. This usually involves consultation, selection criteria, and consideration of suitable alternative roles. If redundancy is genuine and the process is fair, the employer may still dismiss on redundancy grounds.
If you refuse the agreement, you may still be entitled to statutory redundancy pay and any contractual redundancy pay. However, you may lose the additional compensation offered under the settlement agreement. The key difference is that, without a settlement agreement, you retain the right to challenge the redundancy if the process or selection is unfair.
Settlement agreements following workplace disputes
Settlement agreements are commonly offered after grievances, allegations of discrimination or harassment, whistleblowing concerns, or a breakdown in working relationships. If you refuse to sign, the dispute will usually continue through internal procedures, mediation, or investigation.
In these situations, employers often have a stronger incentive to settle, particularly where legal risk exists. Refusing to sign may lead to further negotiation and, in some cases, an improved offer. However, there is no obligation on the employer to increase the terms, and they may decide instead to manage the issue internally.
Settlement agreements linked to performance or conduct concerns
Where a settlement agreement is offered due to performance or conduct issues, it is often presented as an alternative to a formal capability or disciplinary process. If you refuse to sign, the employer may revert to that process, which can include performance improvement plans, warnings, and potentially dismissal.
Refusing to sign does not mean dismissal is inevitable, but it does mean the employer may pursue a route that could ultimately lead to dismissal if the issues are not resolved.
Can your employer dismiss you for refusing to sign?
An employer cannot usually dismiss an employee simply because they refused to sign a settlement agreement. However, they can dismiss if there is a fair reason and a fair process is followed. Fair reasons can include redundancy, capability, conduct, statutory restriction, or some other substantial reason.
Whether a dismissal can be challenged will depend on the reason for dismissal, the process followed, and factors such as length of service and employment status. This is why refusing a settlement agreement without understanding the likely next steps carries risk.
Will refusing to sign lead to a better offer?
Settlement agreements are often negotiable, and employers may expect some negotiation. Refusing to sign outright can, in some cases, lead to improved financial terms, a better reference, extended notice or benefits, or changes to restrictive clauses. However, there is no guarantee. The employer’s willingness to improve the offer will depend on their assessment of legal risk and their desire to resolve the situation quickly.
Should you negotiate instead of refusing?
In many cases, negotiation is more effective than outright refusal. Negotiating keeps the dialogue open while allowing you to seek better terms. Common negotiation points include compensation, tax wording, references, notice pay, benefits, and post-termination restrictions.
Employers often impose deadlines, but you can ask for more time. A settlement agreement should not be signed under pressure. You are entitled to take legal advice and consider the terms properly, and extensions are commonly granted.
For more information, please contact us on 01524 907100, info@pre-law.co.uk or through our online enquiry form
