What to Check Before Signing
Before accepting an employment settlement, find out how much of the offer is money you would be owed anyway. A payment described as six months’ salary may include your final wages, notice pay and unused leave. The amount offered for settling a disputed dismissal could be considerably less.
The wording deserves just as much attention. A settlement can bring an employment dispute in Cyprus to an end, but it may also release claims you intended to pursue or impose obligations affecting your next job.
Check the payment breakdown
Ask for a written breakdown before negotiating the overall figure. It should distinguish between:
- salary earned and reimbursable expenses;
- notice pay, if payable;
- payment for accrued, untaken annual leave;
- any 13th salary, bonus or commission due;
- the additional sum offered to settle the disputed claims.
For a 13th salary or bonus, check the employment contract, any applicable collective agreement and the employer’s established practice. If you are leaving part-way through the year, establish whether a proportion is due and how it has been calculated. Commission needs particular attention where sales have been made but the customer has not yet paid.
Provident fund benefits may be handled separately. Obtain an up-to-date statement and check any outstanding contributions. Where payment will come from the fund, confirm its rules and payment arrangements with the person responsible for administering it. If you hold shares or options, read the scheme documents as well. The departure date may affect those interests, and the company operating the scheme may be different from your employer.
For each payment, establish whether the figure is gross or net and what deductions will be made. Tax and contribution treatment can differ between the components. Describing a payment as compensation or ex gratia does not establish that the whole amount is tax free.
There should be a definite payment date. If the employer proposes instalments, agree what happens if one is missed. Have your lawyer check when the release of claims takes effect and how it fits with the payment schedule. Accepting deferred payment may leave you having to pursue the employer for money after you have left.
Do not acknowledge receipt of money that has not arrived. If payment is to follow signature, the document needs to say that. Settlement negotiations do not suspend the employer’s obligation to pay wages when due.
Which claims you are settling
Cyprus courts have upheld settlements reached to resolve serious disputes or uncertainty over an employee’s rights. A clear release, freely agreed in those circumstances, can prevent a further claim covered by the settlement. There are exceptions for rights that legislation does not allow the parties to waive, so the particular claims need to be checked.
An employer may ask you to sign a receipt when paying final wages or releasing provident fund benefits. Check whether it merely acknowledges payment or also asks you to give up claims. A receipt for existing entitlements does not necessarily settle a separate unfair dismissal claim. Even a document described as a receipt needs to be read in full.
Read references to ‘all claims’ carefully, particularly where the release also names directors or other companies in the group. A negotiation about one unpaid bonus may produce a draft covering much more than that bonus. Ask your lawyer to explain what would remain open to you after signing.
If a matter is to remain outside the settlement, record it expressly. This might concern benefits still to be paid by a provident fund or a claim the parties have agreed to leave unresolved. The wording should also preserve your right to enforce the settlement itself if the employer fails to comply.
The terms of your departure
The final day at work and the date employment ends are not necessarily the same. If you will stop attending work but remain employed for a period, agree what happens to salary and benefits during that time. Payment instead of working a notice period needs to be identified separately.
Read any resignation letter supplied with the agreement. A statement that you are leaving voluntarily may affect your position if the employer has already decided to dismiss you. The documents need to reflect the circumstances and the departure terms actually agreed.
Redundancy deserves a separate check. Calling a departure redundancy does not establish entitlement to a payment from the Redundancy Fund. The legal conditions and the actual reason for termination determine eligibility. Nor should you simply add a proposed employer payment to an estimated Fund payment: their interaction needs to be checked under the applicable rules and the terms of the offer.
Find out whether the departure arrangements could affect unemployment benefits. If your residence or work permission depends on your employment, obtain immigration advice before committing to a leaving date. These consequences cannot be settled just by an assurance from the employer.
Obligations after you leave
Restrictions on joining a competitor or dealing with former clients need legal review. Cyprus law places substantial limits on restraints of trade. An employer cannot assume that a non-compete clause becomes enforceable because it appears in a settlement or because the employee is paid to accept it. Get advice on such a clause before signing, even if you believe it is unenforceable.
Confidential business information and trade secrets raise different issues. Check which existing obligations will continue and whether the draft adds new ones. Confidentiality terms should allow appropriate disclosures for professional advice and disclosures required by law. They must not obstruct legally protected reporting.
Also look for clauses requiring you to repay money or allowing the employer to withhold payment if you breach another term. Ask what would trigger the clause and have its enforceability checked. This is especially important if a breach of confidentiality could lead to a demand for the entire settlement to be repaid.
An agreed reference can be useful when looking for work. If it forms part of the deal, attach the wording to the agreement. You can also agree what colleagues and clients will be told about the departure. Leave enough time to arrange the handover and return of company property, particularly if access to the office or company systems will end immediately.
Before signing
Give your lawyer the employment contract, the proposed agreement and any termination letter, together with the correspondence explaining how the dispute arose. Payslips and records of disputed remuneration may be needed to check the figures. Reviewing the agreement alone may leave an important part of the claim out of account.
The advice should cover what you could claim if no settlement is reached and the evidence supporting it. Discuss the likely cost and time involved in pursuing the claim. A firm payment date may matter considerably to someone who is leaving without another job, but that still needs to be weighed against the value of the rights being settled.
If an offer has a short deadline, ask for enough time to take advice. Obtain a translation if you need one. Any statement in the agreement that you have received legal advice must be true, and any employer contribution towards your legal fees should be recorded.
Coercion, undue influence or misrepresentation may provide grounds to challenge an agreement, depending on the facts. Simply regretting the bargain does not. Do not sign expecting that you can readily undo it afterwards.
During negotiations, make clear if you intend to be bound only once a final document is signed. When the wording is agreed, check the complete version, including any attachments, and retain a signed copy. Promises about a reference or a later payment need to appear in the agreed terms.
If proceedings are already underway, deal expressly with legal costs and agree how and when the proceedings will be concluded. Coordinate those steps with the payment arrangements. Do not assume that negotiations suspend the time limits for bringing a claim or any existing court deadlines.
How we can help
A. Danos & Associates LLC advises employers and employees on employment settlements in Cyprus. We can review an offer before you respond, assess the claims being settled and negotiate the terms of departure. Where proceedings have already started, we also assist with recording the settlement and taking the necessary steps to conclude the case.
