Voluntary redundancy and self employment

I’ve recently applied and been accepted to take voluntary redundancy. However, on reading the contract there is a clause that says ‘I must not be self employed or be thinking about being self employed or have another job lined up’. If I do they can refuse to honour the settlement figure agreed? For the past 18 months or so I’ve been registered self employed, running a small craft business from home as an extra income. I now am unsure what to do. Can they legally enforce this clause? My intention was to use my settlement pay and put this into my business in order to grow it and hopefully keep an income for the family.

I note from your question that when you opted for voluntary redundancy your employer agreed to pay you compensation for your loss of employment and in return they have asked for your written confirmation to be bound by the clauses of a contract. This contract is more commonly known as a settlement agreement. A settlement agreement is a legally binding contract that, once signed, waives any right you may or may not have had to bring a claim against your employer in a court or employment tribunal.

You explained that there is a specific clause within the settlement agreement that you are worried about. You noted that the agreement states that you must not be self-employed or be considering self-employment or even have another job lined-up, and that if you do then your employer will refuse to pay you the settlement figure previously agreed.

As stated above, the settlement agreement is a legal contract and if you agree to its terms and sign it then you would be bound by its contents. I am assuming that the settlement agreement prohibits other work at the time of signing the settlement agreement and even if this is not clear from the clause itself, this will be the implication. Strictly speaking if you are working when you sign the settlement agreement, your previous employer could refuse to pay your settlement money.

You therefore have a couple of options: you could keep quiet about the work and not inform your employer. If your employer subsequently finds out, it could refuse to pay you the settlement sum or, if the settlement sum has already been paid, it could pursue you for breach of contract because you have not complied with the terms of the settlement agreement. Whether your employer refuses to pay you the settlement sum/pursues you for breach of contract or chooses to take no further action is likely to depend on a number of factors, for example, the amount of the settlement sum and whether your business is in any way related to or in competition with your previous employer’s business. You other option would be to inform your employer about your self-employed work and hope that it decides to take no action. Again, your employer’s decision as to whether or not to take any action is likely to depend on the amount of the settlement sum and whether your business is in any way connected with your previous employer’s business.

If you would like some further advice regarding any of the points discussed above then please contact Tracey Guest on 0161 975 3823.

*Helen Frankland assisted in the answering of this question.

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