As we have covered in our previous articles, this summer the Government is making changes to the way employment claims can be settled.
The idea is that where a Settlement Agreement (the new name for a Compromise Agreement) has been offered the employee will not be able to use or refer to the Settlement Agreement in an an unfair dismissal claim. This will apply to ordinary unfair dismissal claims only. Therefore, other claims such as automatic unfair dismissals or discrimination will not be covered. In addition, it will not apply where there has been “anything said or done which in the Tribunal’s opinion was improper, or was connected with improper behaviour.” If such negotiations are successful then the parties will enter into a ‘Settlement Agreement’, which is the new name for a Compromise Agreement.
Many readers will be aware that discussions can already take place between employers and employees in order to reach a Compromise Agreement on a ‘without prejudice’ basis. This means that any statements made during a ‘without prejudice’ meeting or discussion cannot be used in a Court or Tribunal as evidence. This ‘without prejudice’ confidentiality does not, however, apply where there is no existing dispute between the parties. The new rules will run alongside the ‘without prejudice’ rule and extend protection to situations where there is no existing employment dispute. This is meant to provide greater flexibility for employers to hold discussions with employees in an open manner.
In February 2013, ACAS (the Advisory, Conciliation and Arbitration Service) produced a draft Code of Practice on Settlement Agreements which formed part of a consultation process. Our article on the draft Code can be found here. ACAS has now responded to the consultation and the final version (subject to parliamentary approval) of the Code can be accessed here (see pages 11 to 16). ACAS will also later publish non-statutory guidance to assist employers interpret the requirements set out in the Code.
The Code is short and succinct. The salient points of the Code are as follows:
- The initial proposal to enter into a settlement agreement can be made orally, but ultimately everything should be set out in writing. It is likely that the non-statutory guidance will provide examples of written offer letters and also a suggested template for a settlement agreement.
- Employees will still be required to receive advice from an independent advisor on the terms and effect of a settlement agreement.
- The Code suggests that a minimum period of ten calendar days should be allowed for parties to consider the proposals. Parties can agree other ‘reasonable’ periods. However, the Code does cite not giving a reasonable period as potentially constituting improper behaviour.
- The Code says it is good practice to allow an employee to be accompanied by a work colleague, trade union official or trade union representative at any meeting to make or discuss a proposal.
- The Code also says that it will be improper behaviour if an employer says to an employee, before any form of disciplinary process has begun, that if a settlement proposal is rejected then the employee will be dismissed. This is in accordance with the ACAS Code of Practice on Discipline and Grievance Procedures since a disciplinary decision should never be pre-empted and decision on disciplinary matters should not be made until after a disciplinary hearing has been held.
We have reflected before on the limitations presented by this new piece of legislation and the potential for it to create more rather than less litigation, particularly as there are grey areas around inadmissible and admissible parts of a discussion (as employees could allege that part of a discussion was discriminatory) and what might amount to “improper behaviour.” However, it is an interesting development and, used correctly and in accordance with the Code and guidance, may prove a useful tool for employers.
We can advise employers on approaching negotiations, drafting settlement agreements and also advise employees on entering into settlement agreements. If you need advice, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).
Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.