This summer, the Government will implement legislation designed to make it easier for employers to negotiate settlement agreements with employees. ACAS has now published its Code of Practice on Settlement Agreements, which explains in more detail how this will work in practice.
Change to the law
The new law on settlement agreements (introduced by the Enterprise and Regulatory Reform Act 2013 and inserted into the Employment Rights Act at s111A) will come into force this summer, probably in July. It will provide an additional mechanism for employers and employees to have confidential discussions about terminating employment on agreed terms, without the employee being able to rely on the details of the conversation as evidence in an unfair dismissal claim.
The protection is wider than that offered by the ‘without prejudice’ principle, as it applies even where there is no pre-existing formal dispute. However, it will only be suitable in certain situations. For example, it only applies to ordinary unfair dismissal claims and will not apply where there is ‘improper behaviour’ during the settlement discussions. So, whilst s111A termination discussions will be a very useful tool for ending employment quickly outside of the formal processes in some situations, they will not be suitable in all circumstances.
Acas has published the final version of their statutory Code of Practice on Settlement Agreements which sets out the broad principles covering their use. It will now be laid before Parliament and is expected to be approved in time to come into effect in the summer, at the same time as s111A is implemented.
We are still waiting for non-statutory ACAS guidance, which will flesh out how to use settlement discussions in practice. When this is published, we will report more fully on the new law.
What this means in practice
In order to help you understand how s111A settlement discussions might assist you, we are running a series of national seminars in September and October 2013 ‘Ending the Employment Relationship: Off the record or by the book’.
Taking into account the new law, these seminars will take a practical look at how best to terminate employment in a variety of typical, but challenging situations. For example, how do you exit underperforming employees with good appraisals, employees approaching retirement, employees whose relationship with colleagues has broken down and how should you deal with employees who attempt to derail the process? Click here for more details.