Reaffirmation Letter
Reaffirmation letters (also referred to as reaffirmation certificates or reaffirmation agreements) are sometimes required to support an existing settlement agreement.
Settlement agreements (previously known as compromise agreements) provide a legally binding contract by which an employer and employee can part ways, and agree to not have legal relations in the future.
Although the contracts can be long in the vast majority of cases, the essence of the agreement is the employer agreeing to paying the employee a fixed amount of money in exchange for the employee agreeing to never take their employer to an employment tribunal or Court.
In most cases, a single document setting out the terms will suffice to protect both the employee and employer, and the parties can simply sign this single document once, typically on or around the termination date.
It is not at all uncommon for the termination date set out in the document to be slightly earlier than the date the settlement agreement is signed, or slightly later, and nothing turns on this. Similarly, the parties may sign the contact on separate days, and that also does not affect the validity of it at all.
Occasionally, a settlement agreement is undertaken in two stages. This is almost invariably where there is a long gap between the signing of the settlement agreement and the employee in fact ceasing their employment.
Usually this is when an employee, particularly a more senior employee, will be continuing working in order to organise a handover, although it can occur when an employee is on garden leave.
Because the main purpose of a settlement agreement from an employers’ point of view is to cut off the possibility of the employee bringing a legal claim against them in the future, a settlement agreement which is signed and dated some time before the employees employment is in fact legally terminated, does not protect an employer from a claim which might arise during the period after the agreement has been signed.
The employee in this situation could pocket the settlement agreement money and then bring a claim arising out of events which occurred after the signing of the agreement.
A further concern that employers are trying to protect themselves against, by creating a settlement agreement in two stages, is a situation in which the employee commits an act of gross misconduct after the agreement has been made in full - where the employer would normally be entitled to dismiss an employee, and therefore pay them no compensation.
For example if the reaffirmation letter were not a condition of the settlement, a vengeful employee might sign the settlement agreement and then sabotage the business or poach clients.
An employee typically makes a warranty in a settlement agreement that they have not engaged in any behaviour which would amount to gross misconduct; the reason being if they have the employer could generally dismiss them without paying any compensation. Although agreements always state that if any such conduct comes to light in the future all monies paid must be handed back, in practice this is difficult to enforce and is rarely done.
In order to protect themselves in these scenarios, some employers will insist on the settlement agreement forming two parts, typically a “normal” settlement agreement at the time terms are agreed, and then a further “reaffirmation agreement” at the time the employee in fact ceases their employment.
This latter reaffirmation agreement requires the employee to reaffirm the original terms of the settlement agreement, with particular reference to the fact they will no longer have the right to bring any legal claims against their employer, and that they have not committed any misconduct in the intervening period since originally signing the agreement.
Whether or not there is a binding agreement after the original settlement agreement, or merely only after the affirmation letter has been signed will depend on what is set out in both documents and what the parties agree to.
Most commonly though the original settlement agreement is a binding agreement: otherwise the employee would be giving up their employment with no protections at all for the future if the employer then refused to sign the second agreement. Generally therefore the first agreement is a binding agreement, but will set out terms upon which the reaffirmation letter must be signed and with a financial penalty if this is not done.
Where the employer requires a reaffirmation letter this is the employers responsibility because they are the ones who gain from having the reaffirmation agreement. Therefore it is for the employer to organise the letter, and to pay for the employee to receive further legal advice on the terms and effects of the agreement.
For a settlement agreement to be legally binding, the Legal Services Act requires the employee to have received legal advice from an “relevant independent advisor” – which includes any solicitor or barrister.
Even though the agreement being advised on is (generally) the same as before, legal advice needs to be taken again because the circumstances may be different, because it is possible that during the period since signing the settlement agreement that the employee may have experienced things which give rise to a claim, and so the advisability of whether to sign the proposed agreement needs to be given additional consideration.
In the vast majority of situations a reaffirmation letter is unnecessary and provides no additional protection to the employer. It is never a matter for the employee to raise and request when organising a settlement agreement, because it only provides the employer with additional protections.
It is very important to note that if your employer has agreed a settlement agreement which has been signed, then you are under no obligation to agree to a subsequent reaffirmation letter, and if your employer insists upon it, you are entitled to refuse, and can rely on the agreement signed to pursue the financial compensation which is set out there.
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This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of our company. For employment law advice please get in contact and speak to your employment law solicitors.
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