Settlement agreement when the employee has raised discrimination

A discrimination allegation changes the settlement: the claim is uncapped, there is no qualifying period, the protected conversation gives no cover, the injury to feelings award is on top of financial loss, and the confidentiality the employer wants is limited by law. The agreement has to be offered on the right footing, priced against the real exposure, waive the claims under the Equality Act specifically, stay within the limits on non-disclosure terms, and leave the employer in a position to deal with what the allegation revealed. I draft the agreement and the note on the conversation for the employer, £795 fixed, three working days; adding the negotiation with the employee's adviser makes it £995.

Who this is for

Employers in England and Wales where an employee has alleged discrimination, harassment or victimisation, in a grievance, a tribunal claim or a solicitor's letter, and an agreed resolution is being considered.

What matters in a settlement after a discrimination allegation

Why discrimination changes the settlement

A discrimination claim under the Equality Act 2010 can be brought from the first day of employment and by applicants, has no cap on compensation, includes an award for injury to feelings, can be brought against individual colleagues as well as the employer, and shifts the burden of proof to the employer under section 136 once facts are shown from which discrimination could be inferred; the employer's exposure is therefore larger and less predictable than in an ordinary unfair dismissal, which affects the price, the drafting and the employer's appetite to settle, and the note that comes with the agreement helps the employer assess the exposure before it makes an offer.

The protected conversation that does not apply and the without prejudice rule that does

Section 111A of the Employment Rights Act 1996 protects pre-termination negotiations only in ordinary unfair dismissal claims, so where discrimination has been or may be alleged the offer must be made without prejudice, which requires a genuine dispute (the allegation itself usually supplies one) and a genuine attempt to settle it, with the offer marked as such and the conversation kept to the settlement; an offer made in a conversation the employee can later refer to, in a discrimination claim, as evidence of the employer's attitude is the mistake the note is written to prevent.

The value of a discrimination claim and the injury to feelings award

Compensation for discrimination comprises financial loss (lost earnings and benefits for as long as the tribunal finds the loss continues, which can be years for a senior employee who struggles to find equivalent work), an award for injury to feelings in bands the tribunal sets by reference to the seriousness of the treatment and updated annually, aggravated damages in bad cases, interest, and potentially a personal injury element where the discrimination caused ill health; the settlement should be priced against that exposure discounted for the prospects, and the agreement should allocate any sum for injury to feelings separately, because its tax treatment differs from compensation for loss of employment and the accountants should confirm it.

The waiver under the Equality Act and the specific claims

A discrimination claim is waived only by a qualifying settlement agreement under section 147 of the Equality Act 2010, which requires the same conditions as section 203 of the Employment Rights Act 1996 (writing, the particular complaint, independent advice from a relevant adviser with insurance, the adviser identified, the conditions stated) and in addition requires the adviser to be independent of the employer; the agreement should list the discrimination, harassment and victimisation claims by reference to each protected characteristic alleged and each section of the Act, because a waiver of 'all claims' does not satisfy the requirement to relate to the particular complaint, and should waive claims against the individuals named as well as the employer, with those individuals' agreement.

Confidentiality and the terms the law now limits

The Employment Rights Act 2025 makes a non-disclosure term void so far as it prevents a worker from disclosing harassment or discrimination (or the employer's response to it), on a timetable the regulations set, and the Solicitors Regulation Authority's guidance already forbids confidentiality terms that would stop a report to the police, a regulator or a professional adviser, or that are used to intimidate; proportionate confidentiality (the amount and the terms, and the circumstances where lawful) with every carve-out stated in full (whistleblowing, which section 43J of the Employment Rights Act 1996 puts beyond any confidentiality term, reports to the police and regulators, advisers, immediate family, the limits the 2025 Act imposes), is what the agreement contains, and it is never used to buy silence about the conduct itself, since an unlawful term is unenforceable and a regulatory matter for whoever drafted it.

Victimisation, the future and the employer's duties after settlement

The employee who raised the allegation did a protected act under section 27 of the Equality Act 2010, and any later detriment because of it (a poor reference, a refusal to re-engage, disparagement) is victimisation that survives the settlement, so the agreement should provide the agreed reference and the non-derogatory terms and the employer should apply them; the employer's duties also continue: the duty to take reasonable steps to prevent harassment under section 40A of the Act, the handling of the individual alleged to have discriminated (whose conduct the settlement with the complainant does not resolve), and the review of the policies and training the allegation suggests are missing; a settlement that ends the claim and changes nothing is the first of several.

What it costs

Settlement agreement, £795. Drafted for your situation, with a note on how to have the conversation. Three working days.

Settlement agreement including reasonable negotiation with the employee's adviser, £995. The agreement in three working days. The negotiation then runs until the agreement is signed or it becomes clear it will not settle. Reasonable negotiation means what, in my experience, amounts to the standard back and forth on a settlement agreement. If the employee or their adviser is being unreasonable, for example by conducting themselves unprofessionally or requiring a substantial rewrite that needs material further legal advice to you, I will flag it and we will discuss how best to proceed, which may involve further fixed-fee work. That would be unusual.

Buying online forms the engagement on payment. The scope is what the settlement agreements for employers page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A bespoke settlement agreement drafted for the exit you are dealing with
• Proper waiver of the relevant statutory claims, so the agreement does what you are paying for
• Advice on the tax treatment, including the £30,000 exemption and what falls outside it
• Confidentiality, non-derogatory statements and an agreed reference
• Reaffirmation or replacement of restrictive covenants, which is often the real value
• A short note on how to open the conversation and keep it without prejudice or protected
• One round of amendments after the employee's adviser responds

What is not included

• Advising the employee, which their own adviser must do independently for the agreement to be valid
• Tribunal representation if the matter does not settle
• Payroll processing of the settlement sums
• Handling the settlement payment, since I do not hold client money

Questions I am often asked

Can we use a protected conversation to offer an exit after a discrimination complaint?

The protected conversation covers only ordinary unfair dismissal. The offer must be without prejudice, on the basis of the dispute the complaint creates, and the note explains how to make it.

How is a discrimination settlement priced?

Against financial loss for as long as it is likely to continue, an injury to feelings award in the tribunal's bands, and the prospects. There is no cap. The note helps the employer assess the exposure before making an offer.

Can the agreement keep the allegation confidential?

Only proportionately and within the limits the law now sets: whistleblowing, reports to the police and regulators, advisers and family cannot be restricted, and the 2025 Act makes terms void so far as they prevent disclosing harassment or discrimination once in force. The agreement states the carve-outs.

Related guidance and services

• Settlement agreements for employers, £795, the service this page describes
• Employment contracts and handbooks, £595
• Shareholders agreement, £995
• Settlement agreement after a grievance
• Anti-harassment policy

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.