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Settlement Agreement


Settlement agreement for court dispute between the employer and employee highlighting the settlement amount, settlement date and other terms such as the as full and final settlement of the dispute.

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Document Description

What is an employment settlement agreement?

An employment settlement agreement is a legally binding agreement between the employer and employee whereby the employee agrees to settle all employment claims against the employer usually in return for financial compensation.

The Employee has filed a claim against the Company ("Claim"). This document comes into play when the parties are desirous of amicably settling the matter referred to in this Settlement Agreement. The agreement covers terms relating to the settlement amount, release and discharge of liabilities, full and final settlement of claims, termination of employment etc.

After the settlement agreement is concluded, the Company no longer holds any obligations, including both on-paper and oral obligations, towards the Employee.

Confidentiality shall be maintained, the Employee is required not to disclose any of the details to any other third parties other than for the purpose of enforcement. It shall also be noted that, however, assignees and successors in the title of the parties shall be bound to this agreement.

The jurisdiction clause requires the parties to specify the particular jurisdiction that is responsible for handling this case, where the governing laws of that certain jurisdiction shall also be the governing laws that this agreement is bound to.

There is a Schedule 1 and Schedule 2 to the agreement:

(A) In Schedule 1, the Employee is required to fill in and sign the “Prescribed notice to withdraw the Claim” form, declaring that the Employee is willing to withdraw the claim when the settlement agreement comes into force. This is to ensure that the Employee has voluntarily agreed to give up his or her rights in resolving to court proceedings in making the Claim.

(B) In Schedule 2, the Employee is required to provide a signed copy of the 'Declaration from the Employee's Independent Advisor'  confirming that the Employee received independent legal advice on the effect of the Settlement agreement on the rights of the parties. This is will ensure that the Employee has a complete understanding of the terms and conditions of the Agreement and that the agreement cannot be invalidated on such grounds.

How to use this Document?


This document should be carefully read by the Employee and the Company.

This settlement agreement may be used in a court dispute, whereby full and final settlement terms are to be established and agreed on. 

Both parties should sign and return a copy, and once signed, both parties should get a copy. To avoid any future disputes, both parties may wish to have their signatures witnessed.

Relevant Hong Kong Laws

In Hong Kong, settlement agreements are governed as matters of contract. Hence, the common law rules on general contracts shall apply. In general, any agreements that are concluded during the course of mediation must be written down and signed by or on the behalf of the disputing parties. Otherwise, it is not enforceable. Moreover, if an employee is claiming compensation in relation to any injuries sustained as a result of an accident arising during his or her course of employment, the compensation scheme must also adhere to the rules laid out in the Employees' Compensation Ordinance (Cap. 282).

Frequently Asked Questions

What should I look for in a settlement agreement?

In a settlement agreement, usually, parties agree to waive their rights to pursue a claim arising from the employment relationship in exchange for a lump sum of money. Hence, it is important for parties to agree on the sum of payment or the calculation methods in relation to this matter.

Am I obligated to agree to a settlement agreement?

No. Parties are never obligated to agree to settle. However, the arbitrator might take into consideration any settlement offers when determining the costs of arbitration. In extreme cases, the arbitrator may even penalise parties for unreasonably refusing to try and settle a dispute.

I have verbally negotiated with my employee, how can I ensure that these terms are included in the settlement agreement?

Before any negotiations, you may prepare a document with all the terms that you would like to include in the final settlement offer. After the negotiation process, you may request each party to sign a memorandum which may serve as evidence of the terms that both of the parties have agreed to.



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