Receiving a settlement agreement can evoke many emotions: uncertainty, frustration or even panic. Often, an employer’s proposal comes unexpectedly and it seems like you have to sign immediately. However, it is important to know that a settlement agreement is always a proposal and not an obligation. You have rights, time to consider and often also possibilities to negotiate.

In this article, we explain step by step what you should do after receiving a settlement agreement, what pitfalls you should avoid and how to ensure the best result.

What is a settlement agreement?

A settlement agreement is a termination agreement in which employer and employee agree on the termination of the employment contract. This is also called “dismissal by mutual consent”.

Important to know:

• It’s voluntary: you don’t have to sign.

• The content determines whether you are entitled to a unemployment benefit.

• The conditions are negotiable: from compensation to references.

First steps after receiving a settlement agreement

1. Stay calm

An employer may insist, but you have 14 days legal reflection time. So don’t let yourself be rushed.

2. Read the agreement carefully

Pay particular attention to:

• Severance payment

• End date of the contract

• Period of notice (must be correct re. unemployment benefit)

• Any clauses (such as non-compete clause)

• Legal cost reimbursement

3. Note questions and ambiguities

Make a list of points that do not fit or that you want to improve.

4. Ask for legal advice

A lawyer can assess whether the agreement:

• Is correctly drafted for your unemployment benefit rights

• Includes a fair compensation

• Needs to be adjusted for your situation

Practical examples

• Example 1: An employee received a settlement agreement without mentioning the correct notice period. As a result, he risked losing his unemployment benefit. After legal correction, he received a safe agreement again.

• Example 2: An employee was offered only the transition fee. Thanks to negotiations, he received two extra monthly salaries and exemption from work.

• Example 3: An employee thought he had to sign immediately and signed the same day. Later it turned out that the non-compete clause hindered him in a new job. With legal help, part of the clause was still destroyed.

Checklist: what to do in case of a settlement agreement

• 📄 Read the settlement agreement fully

• 📝 Note points that are unclear or disadvantageous

• 📊 Calculate whether the transition allowance is correct

• 🕑 Remember your right to 14 days of reflection time

• ⚖️ Have the agreement checked by a labor law lawyer

Frequently asked questions about settlement agreements

1. Am I obliged to sign?
No, it is always voluntary. You can refuse or negotiate.

2. What happens if I don’t sign?
Then your employment contract remains in force. The employer then has to go to the unemployment office or district court for dismissal.

3. Do I have the right to unemployment benefit if I sign?
Yes, if the settlement agreement is correctly drafted (neutral reason for dismissal, correct notice period).

4. Do I always receive compensation?
At least the transition compensation, but often more can be negotiated.

5. Does my employer has to reimburse my lawyer’s costs?
Yes, usually a compensation of several hundred euros is included.

Why Arslan Lawyers?

• Specialized in settlement agreements

• Often achieve a higher compensation and better conditions

• Check whether your unemployment benefit rights are secure

• Negotiate on your behalf without directly litigating