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Settlement Agreements and Settlement Discussions

11 October 2013:  ‘Compromise Agreements’ are now known as ‘Settlement Agreements’, which are prescribed by statute to bring to an end statutory claims arising from employment or its termination, and on which the individual must first seek independent legal advice, normally from a solicitor.


There are new provisions enabling employers to have confidential settlement discussions with employees about severance, and which cannot then be referred to in a grievance or tribunal proceedings (under the new s111A ERA1996). There is an accompanying ACAS Guide To Settlement Agreements which includes some model letters for use in such discussions and a basic pro forma settlement agreement.


In practice there is not a great deal of difference between holding ‘without prejudice’ discussions and ‘settlement discussions’, off the record. Generally though there must be some dispute in order to rely on the ‘without prejudice’ tag, whilst there does not need to be a dispute to use a ‘settlement discussion.’


The ‘without prejudice’ tag cannot be relied on where there is ‘unambiguous impropriety’ (ie; take the settlement or I’ll fabricate a complaint to dismiss you) and ‘settlement discussions’ cannot be relied upon to exclude improper behaviour, such as harassment, bullying or harassment. Furthermore the ‘settlement agreement’ tag can only be relied on in unfair dismissal claims, and not discrimination claims etc.


What is or is not ‘improper’ is debatable in any particular circumstances. However employers should not put undue pressure on employees. For example:


–          A minimum of 10 days should normally be given to enable the employee to take independent legal advice, unless otherwise agreed.

–          Saying take the settlement, or we’ll dismiss you following the disciplinary. Instead say; while we draw no conclusions pending the outcome of the disciplinary hearing, a potential outcome may be your dismissal.


An employee should not use the settlement agreement tag to threaten to attack the employers reputation unless the employer agrees to his or her demands (ie: pay up or I will report you to the press).


Employers can say that if the offer is rejected, and the employee is subsequently dismissed, any money paid at that point will be less (for example the difference between an enhanced and a statutory redundancy payment)


In practice many employers may well refer to having a ‘Without Prejudice’ and a ‘s111A Settlement Discussion’ to be on the safe side. Regardless of the tag used, it would be sensible not to say anything you would be embarrassed about if it came out in an Employment Tribunal.

For advice on settlement agreements from London employment solicitors and lawyers, do call one of our team.

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