Code of Practice on Settlement Agreements - The Details

Acas has published its response to the consultation on the Code of Practice to accompany the use of settlement agreements. It was announced last week that settlement agreements will be in operation from 29th July 2013. The Code is designed to support the new legal provisions in the admissibility of settlement agreement discussions in unfair dismissal cases. Settlement agreements will work along the same lines as current compromise agreements but will extend their scope. Agreements will basically offer employers and employees the opportunity to terminate employment for a sum of money, whether there is an existing dispute or not, and the discussions around the offer of settlement will be inadmissible as evidence at tribunal. This means that the employee will not be able to use the offer as grounds for a claim, or refer to the discussions within their evidence. The settlement agreement will waive the individual’s right to bring a claim to tribunal that is specifically covered in the agreement, as is the case with the current use of compromise agreements. Offers of settlement that are not conducted in line with the statutory code of practice will not gain the inadmissibility protection, therefore the claimant will be able to refer to it in evidence. The consultation sought views on the sort of issues the Code should cover. The Code has been amended in line with public responses to the consultation. The Code will now say the following:

• Settlement agreements may be proposed prior to undertaking any other formal process; by either party; may include a period of negotiation; but are voluntary and parties do not have to agree to them;
• They must ultimately be put in writing, although the initial proposal may be done verbally;
• They cannot simply state that they are made ‘in full and final settlement of all claims’, so must relate to a particular complaint or proceedings;
• The employee must have received advice from a relevant independent adviser, on the terms and effect of the agreement, who has relevant professional protection and who is identified in the agreement;
• The agreement must state that the applicable statutory conditions regulating the agreement have been satisfied;
• As a general rule, a minimum of 10 calendar days must be given to consider the offer, although this can be shortened by agreement;
• There is no legal requirement for employees to be accompanied at a settlement agreement discussion, however, it is good employment practice for employers to allow the employee to be accompanied by a colleague, trade union official or trade union representative.
• Where ‘improper behaviour’ is involved in the offer or discussion, the inadmissibility provisions will not apply, therefore the individual will not be barred from discussing the attempts at agreement in an unfair dismissal claim.

If agreement is proposed but not reached, the parties can revert to normal contractual methods of resolution e.g. disciplinary, capability, grievance procedures. By Nicola Mullineux For any further clarification, please call our 24 Hour Advice Service on 0844 892 2772.