Settlement agreements (formerly known as compromise agreements) can be used to terminate an employee’s employment by way of mutual agreement. They will usually involve the employee receiving a sum of money, but will also prevent the employee from bringing a claim to tribunal for a particular cause of action mentioned in the agreement.

The contents of the negotiations would also be inadmissible, using the ‘without prejudice’ concept, where there was an existing dispute between employer and employee. This means that the discussions are ‘secret’ – they cannot be used as evidence in subsequent tribunal proceedings. ‘Without prejudice’, however, only applies when there was already a dispute.

In July 2013, new legislation was introduced which extended an employer’s current use of settlement agreements. An employer can now have a discussion to terminate employment by way of settlement agreement, and maintain inadmissibility, even where there is no existing dispute. This means that it is now safe to bring an employee in to discuss termination of employment where there isn’t an on-going issue with them; where there are no concerns over performance or behaviour.

Whilst there is now no legal risk in offering a settlement agreement where there is no existing dispute, the process may present some practical problems. The employee must consent to the agreement which means it cannot be forced on them. It will, more often than not, come as a surprise to the employee that their employer wishes to end the employment in this way and they may well be resistant. This means that the way in which the negotiation is held is vitally important in obtaining the employee’s agreement. The employer must, essentially, convince the employee that the agreement is the best option at the time.

Therefore, the employer should:

  • Adopt a friendly tone of voice – being aggressive may not only jeopardise your inadmissibility but may also make the employee defensive and less likely to agree;
  • Explain fully the reason for the discussion – transparency is key to helping the employee understand what is going on. Be truthful. You are doing nothing wrong by having the conversation provided there are no discriminatory reasons behind your choice;
  • Allow for questions and answer them – this again will increase the employee’s understanding and control of the discussion;
  • Lay out the agreement as an option that the employee can take – offer the agreement as an alternative to remaining in employment and utilising a conduct/capability procedure;
  • Explain that it is the employee’s choice whether he takes the agreement or not and that you will not force it on him;
  • Explain how you will calculate the sum of money offered.

There is a statutory code of practice in relation to negotiating a settlement agreement where there is no dispute, which sets out requirements for employer and employee. The list above complements that code, giving examples of how to approach the discussion.

Clearly, you cannot guarantee that the employee will accept the offer; however, your approach to the negotiation could certainly help in the decision.

For further clarification of this or any other matter relating to employment law in schools or other education establishments, clients should call the specialist Education Team on 0844 892 2810.