Settlement Agreement and Pre-Termination Negotiations

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Still expected to come into force in Summer 2013, the following proposals have been made relating to compromise agreements and pre termination negotiations.

First, it is proposed compromise agreements will be renamed as settlement agreements.  In conjunction with Acas the Government will introduce a new statutory code of practice and accompanying guidance on how to use the settlement agreement and the new provisions.  The Government has stated that it is “keen not to make the statutory code more prescriptive than is essential” and so the code will include principles of good practice which can be departed from where it is sensible to do so.

Second, the Government will introduce a provision which will give employers greater protection when offering settlement agreements outside the context of litigation.

The idea is that evidence of such offers could not then be used as evidence in unfair dismissal proceedings unless there is “improper behaviour” by the employer.  The position would therefore extend the “without prejudice” rule, which requires there to be a genuine attempt to resolve an existing dispute between the parties for inadmissibility to apply.

Practical Implications

The pre termination negotiation provision, as it stands, will only prevent what is stated in the settlement offer, or during discussions about it, from being admissible in ordinary unfair dismissal proceedings.  This means that the fact and content of such offer or discussions may be referred to in any other case, including automatically unfair dismissal, discrimination and breach of contract claims.  This begs the question of how workable and reliable this provision will be in practice.  It has been said that there is an ‘unreality’ to the idea that you can ring-fence what is proposed in a settlement agreement or said in a meeting from its consequences.

However, whilst we can expect litigation to arise around the interpretation of these poorly drafted provisions, in practice we anticipate most employers continuing to operate in largely the same way as they do already where such conversations are not uncommon.  The safest advice, even when the new provisions are introduced, will be to expect anything you say or offer to an employee to potentially be revealed at tribunal.

For further information, help or advice please contact our Employment Team on 0191 211 7777 or email [email protected].