What happens if your employer breaches the agreement?

Once both sides have signed, the settlement agreement becomes a legally binding contract. Each side must keep its promises. If one party fails to do so, that’s a breach of contract, and the other may have a right to enforce the agreement or claim compensation. Exactly what you can do depends on:

• the type of breach

• how serious it is; and

• what the agreement actually says

Enforcing a settlement agreement

If your employer doesn’t do what was agreed, for example fails to pay or issue a reference, that’s a breach of contract. You can usually bring a breach of contract claim, but where you do this depends on timing.

Breach of a settlement agreement is usually enforced in the civil courts. The Employment Tribunal has a narrow breach-of-contract jurisdiction that applies only after employment has ended, is capped at £25,000, and generally does not extend to enforcing a post-termination settlement agreement.

If in doubt about forum or value, get advice first. In any event, a short solicitor’s letter often resolves payment issues faster than issuing a claim.

Late or missing settlement payments

This is by far the most common problem. Imagine your agreement says payment is due 14 days after signing. The deadline passes. No money. No explanation. Just silence.

That’s a breach of contract. You can claim in the civil courts, or in the Employment Tribunal if the agreement was signed before termination, the claim arises from your employment, and the amount is under £25,000. A late payment won’t usually invalidate the whole agreement. Even if your employer pays late, your waiver of claims will normally still stand unless, and this is rare, the agreement says payment is a condition of that waiver.

If there’s a delay, raise it early. Most employers fix it quickly once reminded. It’s usually admin, not malice.

Breach of confidentiality or non-disparagement clauses

Most settlement agreements include promises not to discuss the deal or speak badly of each other. If your employer breaches confidentiality, for instance by gossiping or making negative comments, it’s technically a breach but rarely serious enough to cancel the whole agreement.

The High Court in Duchy Farm Kennels v Steels [2020] EWHC 1208 (QB) confirmed that breaching a confidentiality clause doesn’t automatically allow an employer to stop payment unless the agreement expressly makes confidentiality a condition precedent to payment. In that case, because it wasn’t, the employer still had to pay the settlement sum. Most agreements don’t go so far as to link any of the employee’s obligations as a condition linked to payment, so a breach will rarely nuke the deal, though it could still lead to separate action.

If the breach causes real harm to your reputation, you could seek damages or an apology, but most disputes of this kind are resolved through correspondence rather than court action.

Injunctions for serious breaches

If your employer leaks sensitive information, harasses you, or damages your reputation, you may be able to apply for an injunction. This is a court order telling someone to stop what they are doing.

The court will only grant it if the breach is serious, ongoing or imminent, and money would not be enough to fix the harm. You also need to act quickly. In urgent cases, a short-term “interim” injunction can be granted before a full hearing.

Injunctions are expensive and risky, and you may have to give a cross-undertaking in damages (a promise to compensate the other side if the injunction later proves unjustified). They are used more often by employers than employees, but if your reputation is genuinely at stake and you can afford it, they are an option.

Can a breach ever void the whole agreement?

Most breaches don’t undo the deal, but a few exceptional situations can make it unenforceable. The courts prefer to uphold settlement agreements because they bring finality, but a breach that goes to the heart of the deal might make it invalid.

Examples include:

• deliberate fraud or misrepresentation during negotiations

• serious pressure or misunderstanding at the point of signing

• lack of mental capacity to contract

• a public body (for example, an NHS Trust) exceeding its powers when agreeing the deal

These situations are unusual and require strong evidence. Most breaches do not invalidate the agreement; they simply create a right to claim damages.

What if the employer claims you told a porky?

So far we’ve looked at what happens when your employer breaks the deal. But what if it’s you who’s accused of breaking it? The legal term for a “porky” in this context is breach of an employee warranty, a short statement or promise confirming things such as:

• you’ve returned all company property and deleted any confidential data

• you haven’t already accepted another job before leaving

• you’re not aware of any conduct that would justify summary dismissal

These clauses give the employer confidence that nothing new will surface after signing and protect the business if it later uncovers serious misconduct. If any of those statements turn out to be false, the employer might be entitled to withhold payment, or even recover money already paid as happened in Collidge v Freeport plc [2008] EWCA Civ 485.

Warranties are enforceable promises, and giving one that isn’t true can have serious financial consequences. So, before signing, it’s definitely worth reading every warranty carefully. If you’re unsure or uneasy about one, qualify your statement by saying it’s true to the best of your knowledge and belief, or ask your solicitor to adjust the wording so it reflects your situation. It’s always better to be upfront now than to risk losing your payout later.