What is a "settlement agreement" in the context of employment disputes?

A settlement agreement in the context of employment disputes refers to a legally binding agreement that resolves conflicts or disagreements between parties, typically between an employer and an employee. These agreements are established to address issues such as wrongful termination, discrimination, or other workplace grievances without the need for lengthy litigation.

The importance of a settlement agreement lies in its ability to provide closure to disputes and to outline the terms for resolution, which may include monetary compensation, reinstatement, or other agreed-upon terms. Because it is legally binding, both parties are obligated to adhere to the terms set forth in the agreement, thereby ensuring that mutual consent and resolution are achieved in a formal manner.

In contrast, informal discussions lack the legal enforceability that characterizes a settlement agreement. A court ruling is a decision made by a judge after legal proceedings, not an agreement between parties. A policy for employee conduct pertains to the guidelines and expectations set by an employer for employee behavior, rather than a resolution to a dispute. Therefore, the definition of a settlement agreement as a legally binding agreement resolving a dispute is accurate and encapsulates its function in employment contexts.