It's good to talk ... if done properly

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As well as the introduction of Employment Tribunal fees and the new cap on unfair dismissal compensatory awards, 29 July 2013 saw other significant employment law changes.

Specifically, the re-naming of Compromise Agreements to Settlement Agreements and the prevention of pre-termination negotiations being admissible in unfair dismissal claims unless there has been improper behaviour.

In relation to pre-termination negotiations, this means any offer made or discussions held before the termination of employment with a view to employment being terminated on agreed terms. The government wants to make it easier to end employment relationships that are not working out by effectively extending the scope of the "without prejudice" rule in that there is no need for there to be an existing dispute between the parties. Subject to there being no improper behaviour, the pre-settlement negotiations cannot be referred to in any subsequent unfair dismissal claim. Note, the provision does not apply to discrimination claims.

ACAS have now published a Code of Practice on Settlement Agreements which explains what Settlement Agreements are, the requirements for them to be legally valid and sets out some examples of what constitutes improper behaviour which include:

  • All forms of harassment, bullying and intimidation including the use of offensive words or aggressive behaviour;
  • Physical assault or the threat of physical assault and other criminal behaviour;
  • All forms of victimisation;
  • Discrimination because of protected characteristics;
  • Putting undue pressure on a party for instance not giving reasonable time for consideration of the settlement offer or an employer stating before any form of disciplinary process has begun that if the settlement offer is rejected the employee will be dismissed.

It is worth noting that Settlement Agreements can be proposed by both employers and employees and they can be proposed at any stage of the employment relationship. The Code states that the parties should be given a reasonable period to consider the settlement offer and suggests a minimum period of 10 calendar days. ACAS recognises that parties are likely to find in helpful to discuss the settlement proposals face to face, but the question then arises about employees having the right to be accompanied at a settlement meeting. Interestingly, the Code refers to the fact that even though it is not a legal requirement, employers should allow employees to be accompanied by a work colleague or trade union official as a matter of good practice. It will be interesting to see in due course what employers decide to do in these circumstances. Finally, it is important to note that one of the requirements for the Settlement Agreement to be legally valid (as with Compromise Agreements previously) is that the employee must have received advice from a relevant independent adviser on the terms and effect of entering into the Settlement Agreement.

Separate ACAS guidance on Settlement Agreements was expected at the end of July.