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What's New? > News & Press Releases > Settlement Agreements


Apr 13

Settlement Agreements

By: Michael Judkins

This year we will see a number of changes to reflect the mission of the present coalition government to review employment law and to remove what it calls unnecessary burdens and obstacles to growth.

Following the increase of the qualifying period to claim unfair dismissal from one to two years, the pendulum will swing further in favour of the employer.

One such change likely to be introduced in the summer, is the creation of "Settlement Agreements".

Many employers will have heard of, and some may have used, Compromise Agreements. The employee may not be performing, might become troublesome, or simply surplus to requirements.

The employer often without going through a formal process, offers or agrees to make a payment to the departing employee in exchange for the employee accepting loss of employment and giving up the right to make any claims.

The Settlement Agreement gives more certainty, with two main differences.

Firstly, at the moment the employer can only initiate the possibility of compromise settlement where a dispute of some form has arisen, usually the starting of a disciplinary or grievance process. Now the employer can offer an agreement to settle even when there is no apparent dispute.

Secondly, the employer also has to be very careful in trying to speak on a "without prejudice" basis with an employee.

That is a type of discussion in which concessions or offers can be made for the purpose of reaching settlement and what is said is protected from being openly disclosed to a Court or Tribunal later on if the discussions break down.

The employer has always had to tread very carefully in initiating that sort of discussion to make sure the employee recognises it as being “off the record”.

The change will mean that making an offer of settlement cannot be used as evidence before the Employment Tribunal in a later unfair dismissal case, as long as there has been no improper behaviour in the process.

Improper behaviour will include harassment, giving no proper time for consideration of the employer’s offer and threats to dismiss the employee if the offer is turned down.

Once this new process becomes familiar, then Settlement Agreements are likely to be used very widely and certainly as often as the current Compromise Agreement.

Ward Gethin Archer are happy to advise in all areas of employment law and, if you are an employer, in this often tricky area of dealing with a member of staff who is seen to have no future, so as to avoid the risk of difficult or expensive consequences.

This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.