As you will be aware, we have been providing regular updates on the progress of the Government’s proposals to reform various areas of employment law. In particular, they have been looking at ways to make it easier for employers and employees to have “frank discussions” about ending the employment relationship. This is to try and deal with concerns from businesses that it can be too difficult and time-consuming to dismiss problem employees, and also to try to relieve the burden on the Employment Tribunal system.
The first of these developments was in late 2011 when we first heard about proposals for “Protected Conversations.” The idea of these was that the parties could have an off-the-record chat, which could not then be referred to in any Employment Tribunal proceedings.
The proposals came in for criticism because it was not clear how they would work in practice, and how they would differ from the existing law on ‘without prejudice’ conversations. Presumably protected conversations would only work if both parties were happy to participate – but what would happen if one party did not agree to take part?
In the meantime, we heard earlier this year about the leaked report prepared in 2011 by venture capitalist Adrian Beecroft at the request of the Government. Mr Beecroft suggested the possibility of ‘no fault’ dismissals where an employer could terminate an employee’s employment and the employee would be entitled to a compensation payment based on a statutory formula (similar to a statutory redundancy payment). Controversially, the report said that employers may end up using ‘no fault’ dismissals as a way of simply getting rid of people, but that was a price worth paying for the flexibility it would bring for employers.
Beecroft certainly provoked some heated debate, but ultimately Vince Cable announced that his suggestions were not going to be implemented. Instead, the Government announced the Enterprise and Regulatory Reform Bill, which aims to reform various areas of employment of law. In particular, the Bill includes plans to replace compromise agreements with settlement agreements.
Compromise Agreements are currently one of the main methods of settling employment disputes. They are a statutory concept, and in order for a Compromise Agreement to be legally binding, the statutory requirements must be met. One of the requirements, for example, is that the employee has taken independent legal advice on the terms and effect of the Compromise Agreement. The Government felt that Compromise Agreements were becoming unwieldy – in some cases they can become lengthy and complex documents when the parties try to deal with issues other than simply settling employment disputes (such as tax indemnities and confidentiality provisions).
Instead, the plan is for there to be a standard form of settlement agreement, together with standard draft letters to accompany it. It is not clear at this stage what the contents of a settlement agreement will be, but we suspect that the requirement to take independent legal advice is unlikely to be changed.
Last week some amendments were made to the Bill at the committee stage, which give more detail about the protection given to employers who instigate discussions.
The provisions state that in unfair dismissal claims, an Employment Tribunal will not be able to take account of any offer made “with a view to [employment] being terminated on terms agreed between employer and employee.”
However, this provision will not apply in cases of automatically unfair dismissal (such as where the dismissal is because of a protected disclosure, i.e. whistleblowing) and will also not apply to the extent the Tribunal feel that it is “improper”. No definition is given of what ‘improper’ means and it seems highly likely that this will be an area for challenge.
Most interestingly, the protection is only given where unfair dismissal claims are concerned, and not, for example to claims such as breach of contract, unlawful deduction from wages and all types of discrimination. Many Employment Tribunal cases involve a mixture of issues and this could lead to a situation where Employment Tribunals are expected to ignore evidence for some parts but hear it for others. Of course, it may be that any discussions about those claims might be covered by the ‘without prejudice’ rule anyway – but that begs the question as to what these provisions add to the existing law.
There is no doubt that employers and employees need an efficient way of resolving their disputes – the thousands of Compromise Agreements completed each year are a testament to that. But will the new proposals improve the situation, or just add complications? We will of course keep you updated on developments as they happen.
If you have a dispute with an employee then we can help. Where appropriate, we can give expert guidance on what any potential claims may be worth, and on how best to approach a potential Compromise Agreement, including preparing the agreement itself. Please call us on 01243 836840 for a no obligation chat or email us at [email protected].