Settlement Agreements

From 29 July 2013 the old style compromise agreements have now been replaced with settlement agreements. They are still binding arrangements made between employer and employee, as settlement of any outstanding employment matters.

There will be a new statutory framework which will allow certain discussions to be kept confidential from a tribunal in most unfair dismissal cases. This is covered within the new section 111A implemented into the Employment Right Act 1996. ACAS have also released guidance on best practice for carrying out such discussions.

‘Pre-Termination Negotiations’ means any offer made or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed by the employer and employee.

There are exceptions to this, however, and these are as follows:

  • This only applies in unfair dismissal cases;
  • It does not apply to automatically unfair dismissals’ and
  • If “anything said or done which in the Tribunal’s opinion was improper, or was connected with improper behaviour” then evidence is inadmissible only “to the extent that the Tribunal considers just”.

Examples of improper behaviour will include:

  • All forms of harassment, bullying and intimidation (including through the use of offensive words or aggressive behaviour);
  • All forms of victimisation and discrimination;
  • Physical assault or threats of physical assault; or
  • Putting ‘undue pressure’ on a party.

‘Undue pressure’ would occur whereby an employer does not afford an employee a minimum of ten calendar days to consider the formal offer; or an employer reduces the value of an offer within those ten calendar days; or when an employer informs the employee that a dismissal is inevitable; or when an employee threatens to undermine an employer’s reputation.

It would not be considered to be improper if an employer sets out in a neutral manner the reasons that have led to the proposed settlement agreement or factually states the alternatives if agreement cannot be reached, including the possibility of disciplinary action if relevant.

An employee has the right to be accompanied during such discussions by either a fellow colleague or a Trade Union Representative if they are a member of a Union.

Such discussions will normally then result in a settlement agreement. The function of a settlement agreement is to prevent there from being any issues which-when the working relationship ends-could result in the employee making a claim against their previous employer.

Settlement agreements will usually contain provisions for payments for outstanding holiday, redundancy pay, any future references to be given by the company and a clause preventing the employee from bringing any action against the employer.

Due to the legal effect, the settlement agreement is not a legally binding document until a solicitor has signed to say they have advised the employee – which is why the majority of employers pay for the employee’s legal expenses with regards to the agreement.

With more employers using these agreements as a way of ensuring that there are no grounds for complaint after redundancy, it is important that both employers and employees are properly advised.

As employment law specialists, our settlement solicitors in Chelmsford have a wealth of experience in both drafting and negotiating the content of settlement agreements.

For expert advice and assistance please contact Maria Calvy either by telephone or by email using m.calvy@archers-law.co.uk