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  • FIRST POST
    • KittyB52
    • By KittyB52 16th Jun 17, 4:25 PM
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    KittyB52
    Settlement agreement, maternity leave and unemployment
    • #1
    • 16th Jun 17, 4:25 PM
    Settlement agreement, maternity leave and unemployment 16th Jun 17 at 4:25 PM
    In November I was offered a settlement agreement at work which I took without realising what it meant (I had recently returned to work after being off with work-related anxiety). As I was expecting a baby in March, I was given the maternity pay I would have received in addition to the payment in lieu of notice I received. Since the baby arrived, I have been on 'maternity leave' but obviously, officially I am just 'not working'. I am starting to think about looking for work (in the spare 10 minutes a week I have now ) but was wondering if I would be able to claim anything if it takes me a while to find a new job?

    Also, I need to fill in my self assessment form ( I have an Etsy shop which makes very little) - would it be best for me to seek professional advice for this year's SA, as it could potentially be fiddly (i.e. Lump sum payment in lieu of notice is tax free, but maternity pay is not)? Thanks in advance.
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    • Undervalued
    • By Undervalued 16th Jun 17, 4:41 PM
    • 2,854 Posts
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    Undervalued
    • #2
    • 16th Jun 17, 4:41 PM
    • #2
    • 16th Jun 17, 4:41 PM
    In November I was offered a settlement agreement at work which I took without realising what it meant (I had recently returned to work after being off with work-related anxiety). As I was expecting a baby in March, I was given the maternity pay I would have received in addition to the payment in lieu of notice I received. Since the baby arrived, I have been on 'maternity leave' but obviously, officially I am just 'not working'. I am starting to think about looking for work (in the spare 10 minutes a week I have now ) but was wondering if I would be able to claim anything if it takes me a while to find a new job?
    Originally posted by KittyB52
    How so?

    For a settlement agreement to be legally binding you must receive independent legal advice. Did you?
    • KittyB52
    • By KittyB52 16th Jun 17, 6:46 PM
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    KittyB52
    • #3
    • 16th Jun 17, 6:46 PM
    • #3
    • 16th Jun 17, 6:46 PM
    How so?
    For a settlement agreement to be legally binding you must receive independent legal advice. Did you?
    Originally posted by Undervalued
    I didn't receive legal advice at the time (i.e. before I signed - I was only given 24 hours to sign). I was not 100% well at the time and frankly was pleased to be offered a way to leave. I did take advice earlier this year after speaking to friends and I have since made a claim against the company and received an additional small payment.
    • Masomnia
    • By Masomnia 16th Jun 17, 9:16 PM
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    Masomnia
    • #4
    • 16th Jun 17, 9:16 PM
    • #4
    • 16th Jun 17, 9:16 PM
    Unless you received specific legal advice from a solicitor regarding the settlement agreement it's not legally binding.

    Which is good news for you.
    “I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse
    • sangie595
    • By sangie595 16th Jun 17, 9:30 PM
    • 3,166 Posts
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    sangie595
    • #5
    • 16th Jun 17, 9:30 PM
    • #5
    • 16th Jun 17, 9:30 PM
    Unless you received specific legal advice from a solicitor regarding the settlement agreement it's not legally binding.

    Which is good news for you.
    Originally posted by Masomnia
    Not necessarily true. The OP has said that they made a subsequent claim and accepted settlement. That may close any possible claim. But given no facts, impossible to be precise.
    • KittyB52
    • By KittyB52 17th Jun 17, 10:45 AM
    • 10 Posts
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    KittyB52
    • #6
    • 17th Jun 17, 10:45 AM
    • #6
    • 17th Jun 17, 10:45 AM
    I had not received any legal advice before signing the original agreement, but have since taken legal advice and submitted a claim through ACAS Early Conciliation and we reached an agreement for which I received an additional payment. The initial 'settlement agreement' was indeed legally 'iffy' to say the least, but I was not aware of this at time of signing.

    My question was would I be entitled to any benefits in my current situation, as I received maternity pay as a lump sum (as part of the settlement agreement) and am technically unemployed rather than on maternity leave.
    • Undervalued
    • By Undervalued 17th Jun 17, 1:28 PM
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    Undervalued
    • #7
    • 17th Jun 17, 1:28 PM
    • #7
    • 17th Jun 17, 1:28 PM
    I had not received any legal advice before signing the original agreement, but have since taken legal advice and submitted a claim through ACAS Early Conciliation and we reached an agreement for which I received an additional payment. The initial 'settlement agreement' was indeed legally 'iffy' to say the least, but I was not aware of this at time of signing.

    My question was would I be entitled to any benefits in my current situation, as I received maternity pay as a lump sum (as part of the settlement agreement) and am technically unemployed rather than on maternity leave.
    Originally posted by KittyB52
    Normally, if your employment ceased then what you received was compensation for the loss of your job and not maternity pay as such.

    Generally (with a valid settlement agreement!) you would get a payment in lieu of notice of one week for each year of service up to twelve (unless your contract says more) plus an agreed sum as compensation. The payment in lieu of notice is taxable but the compensation (up to £30K) is tax free.

    It may affect your entitlement to benefits as you have, by definition, intentionally made yourself unemployed by agreeing to a settlement.

    However, the fact that your "settlement agreement" was invalid may well complicate both aspects of this. It may be that the new early conciliation settlement is now the tax free settlement. It may also be that this would now be regarded as an unfair dismissal situation and therefore not attract a benefits sanction.

    I'm afraid your really need professional advice on this.
    Last edited by Undervalued; 17-06-2017 at 1:30 PM.
    • KittyB52
    • By KittyB52 17th Jun 17, 4:19 PM
    • 10 Posts
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    KittyB52
    • #8
    • 17th Jun 17, 4:19 PM
    • #8
    • 17th Jun 17, 4:19 PM
    Normally, if your employment ceased then what you received was compensation for the loss of your job and not maternity pay as such.
    Originally posted by Undervalued
    It was listed in the agreement as payment for maternity leave, or at least, it was specified that the amount was intended to cover the pay I would have received if I'd stayed in employment and taken maternity leave.

    Generally (with a valid settlement agreement!) you would get a payment in lieu of notice of one week for each year of service up to twelve (unless your contract says more) plus an agreed sum as compensation. The payment in lieu of notice is taxable but the compensation (up to £30K) is tax free.
    I was given 3 months salary (notice period was 2 months but would have left me with a 'spare' month before maternity leave started) and 'allowed' to leave immediately - with a baby on the way, it seemed like a good deal to be paid to stay at home.

    It may affect your entitlement to benefits as you have, by definition, intentionally made yourself unemployed by agreeing to a settlement.
    That's what I was afraid of - hopefully I can find work soon then!

    However, the fact that your "settlement agreement" was invalid may well complicate both aspects of this. It may be that the new early conciliation settlement is now the tax free settlement. It may also be that this would now be regarded as an unfair dismissal situation and therefore not attract a benefits sanction.

    I'm afraid your really need professional advice on this.
    Would CAB be able to offer any assistance? Or ACAS? I had to pay for legal advice for early conciliation and am not really in a position to pay for another solicitor...

    Thank you for your help so far.
    • Undervalued
    • By Undervalued 17th Jun 17, 4:41 PM
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    Undervalued
    • #9
    • 17th Jun 17, 4:41 PM
    • #9
    • 17th Jun 17, 4:41 PM
    It was listed in the agreement as payment for maternity leave, or at least, it was specified that the amount was intended to cover the pay I would have received if I'd stayed in employment and taken maternity leave.
    Originally posted by KittyB52
    Yes but you didn't stay in employment. You resigned in exchange for a settlement which they stupidly failed to make legally binding. Hence the reason you were able to make a further claim against them.

    That in itself is very odd and unusual. Most employers, even very small businesses, realise that the only way to protect themselves from exactly this is via a formal SA.

    I'm not an expert of benefits (or anything else come to that!) but it is hard to get past the argument that you choose to leave and make yourself unemployed. Had you been unfairly dismissed and subsequently won a tribunal or settled out of court that would be another matter. Generally, as I understand it, unless you resign on documented medical grounds or are unfairly dismissed then some period of sanction is applied before you can claim JSA? Maybe other will know more.

    Would CAB be able to offer any assistance? Or ACAS? I had to pay for legal advice for early conciliation and am not really in a position to pay for another solicitor...
    Possibly the CAB as far as benefits are concerned. Certainly worth asking but it may well need to be referred up to a higher adviser as it is far from clear cut.

    Presumably tax was deducted from the PILON but not the other money? That too will need addressing as if your entitlement was to two months notice then anything else, regardless of what they called it or what it was "for" should hopefully be compensation and tax free (up to £30K).

    Best of luck!
    Last edited by Undervalued; 17-06-2017 at 4:43 PM.
    • lesley74
    • By lesley74 18th Jun 17, 10:46 PM
    • 2,077 Posts
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    lesley74
    Whether you can claim benefits may depend on what the 'settlement agreement' was for. I think perhaps that's not the correct term for what you have done even via ACAS - could it be a COT3?

    Did you resign during the process? Did you claim constructive dismissal? Even if you didn't, then perhaps the reason for leaving being work related stress (if you can say you had no option really) might make you eligible for benefits.

    I would suggest you start looking for work if you are ready, and at the same time approach DWP and try to sign on and see what they do. Just be honest. You might be eligible due to circumstances.
    • Undervalued
    • By Undervalued 19th Jun 17, 11:29 AM
    • 2,854 Posts
    • 2,599 Thanks
    Undervalued
    Whether you can claim benefits may depend on what the 'settlement agreement' was for. I think perhaps that's not the correct term for what you have done even via ACAS - could it be a COT3?

    Did you resign during the process? Did you claim constructive dismissal? Even if you didn't, then perhaps the reason for leaving being work related stress (if you can say you had no option really) might make you eligible for benefits.

    I would suggest you start looking for work if you are ready, and at the same time approach DWP and try to sign on and see what they do. Just be honest. You might be eligible due to circumstances.
    Originally posted by lesley74
    Sorry but no, it doesn't.

    By definition a settlement agreement is something the employee doesn't have to accept. So they have voluntarily chosen to give up their job in exchange for a financial settlement and / or reference. They could refuse and continue working. If they are then dismissed and they consider it to be unfair they can take it to a tribunal (if ACAS conciliation fails).

    Any settlement agreement with be strictly without admission of liability.

    This particular case is unusual in that it appears the settlement agreement was invalid, as the OP wasn't legally advised before signing. Hence the reason they have been able to re-open the matter. This is where it gets complicated, both regarding entitlement to benefits and also the tax position.

    If the DWP or HMRC get awkward about entitlements the OP is going to need advice from either a solicitor or an accountant. Hopefully the CAB can provide sufficient advice otherwise it could get costly.
    Last edited by Undervalued; 19-06-2017 at 11:31 AM.
    • steampowered
    • By steampowered 19th Jun 17, 12:21 PM
    • 1,379 Posts
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    steampowered
    I can't see why failure to receive the legal advice needed to make a settlement binding would have any impact on the tax treatment, or any impact on the Op's entitlement to benefits.

    If the Op doesn't receive the proper advice on a settlement agreement, that does not render the whole thing void. It simply means the employer cannot rely on it to prevent Employment Tribunal proceedings from being brought.

    The basic rules on how termination payments are taxed will still apply. The rules around benefits will still apply.
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