ACAS guidance on settlement agreements published

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ACAS has published guidance on the operation of settlement agreements and settlement discussions.

We confirmed in our previous HR briefing ‘The Compromise Agreement is dead, long live the Settlement Agreement!’ that we would inform members when ACAS published its guidance, supplementing the statutory Code of Practice on Settlement Agreements (‘the Code’). Well, now it has and here’s the link - Settlement Agreements: a Guide (‘the Guide’).

There is nothing especially surprising about the Guide, other than its length …the final version is a whopping 88 pages! This runs slightly contrary to ACAS’ own advice that an employer when inviting an employee to consider or discuss a potential settlement agreement should refer them to the Code and the Guide for further information and assistance. That’s a big ask for a bed-time read!

The Guide does however contain useful information on the operation and impact of the new S111A of the Employment Rights Act 1996 in relation to pre-termination negotiations and any subsequent tribunal proceedings. It also explains the interplay with existing ‘without prejudice’ rules (See our previous HR briefing). There are some handy checklists for employers and employees involved in settlement discussions as well some template letters that employers could use or adapt when initiating settlement discussions with an employee – although there is no obligation on employers to use these.

However, there are still some key areas where the Guide fails to provide the desired level of clarity in supplementing the Code:

Example scenariosThe Guide provides scenarios illustrating situations where settlement discussions might, or might not be appropriate. But in seeking to add flesh to the Code’s bones, it would have been helpful for employers if these scenarios had been slightly less simplistic and had attempted to tackled some of the thornier HR situation head on, such as where an employer is seeking to terminate the employment of an employee who might have previously had a good employment record and appraisals, or seeking to negotiate with an employee approaching retirement. (We will be attempting to plug these gaps in our national series of seminars - Ending the employment relationship: off the record or by the book).

What amounts to ‘improper behaviour’ for the purpose of s111AThe Guide has also missed out on the opportunity to further clarify the new concept of ‘improper behaviour’ in s111A - which could potentially lose an employer (or employee) the statutory protection of pre-termination discussions being inadmissible in evidence at tribunal in a subsequent unfair dismissal claim. Ultimately, the issue of what amounts to ‘improper behaviour’ has been squarely thrown back to tribunals to decide on the ‘facts and circumstances of the individual case’. This is disappointing in a process that was designed to offer employers some certainty and reassurance when seeking negotiated settlements

Next Steps

The Guide contains a ‘model’ Settlement Agreement and guidance note. EEF’s own settlement agreement is compliant with the model and with all the legislative requirements for a valid settlement agreement, but has been drafted specifically with member’s requirements in mind. Members wishing to use the EEF settlement agreement should contact their EEF adviser.

We have also uploaded ACAS’ s111A template settlement letters on our Essential HR documents on the web, although there is no statutory requirement for employers to use them.

Ending the employment relationship - national series of seminars

Members wishing to explore more fully the options open to employers when seeking to terminate the employment relationship should attend one of our national seminars being run throughout the Autumn – ‘Ending the Employment Relationship: Off the record or by the book?

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