In July 2013 the government introduced rules governing Settlement Agreements. Settlement Agreements have agreements formally known as Compromise Agreements.
The reasoning for a Compromise Agreement was that it was possible for an employer to write to an employee if there was a dispute between them to try to settle the dispute by offering financial terms. The employer, or their legal representative, would write to the employee in correspondence headed “Without Prejudice and Subject to Contract”. This would enable a dialogue to take place between the employer, or its representatives, and an employee, or its representatives, to try and resolve the dispute. It would enable there to be a parting of the ways between the employer and now ex-employee. The employee would receive a payment and the terms of the agreement would be encapsulated in a Compromise Agreement, which had the effect that the employee was therefore unable to pursue claims for damages in an Employment Tribunal or County Court or High Court.
Compromise Agreements worked very well, but sometimes there were difficulties because there wasn’t an actual dispute between the employer and the employee. It was just that perhaps the employer felt that the employee needed to be moved on. If there wasn’t a dispute, the Without Prejudice rule excluding the admissibility of such correspondence from a court or tribunal, could not come into play and the employee would be able to use the fact that the employer was trying to buy the employee out of his/her contract in subsequent Employment Tribunal proceedings. The government felt that these old common law principles of “Without Prejudice” discussions law needed to be updated
In July 2013 the government replaced Compromise Agreements with Settlement Agreements. The government said that providing certain safeguards were followed, it was possible for an employer to have a protected conversation with an employee without fear that if a deal wasn’t forthcoming between them then the employee could not use those discussions in subsequent Employment Tribunal proceedings.
Certain safeguards have to be followed by an employer in order it is able to rely on a protected conversation. The employer should set out its position in writing to the employee; it should not behave in any way that is bullying or intimidating to the employee; it should allow the employee to have access to independent legal advice; it should contribute to the costs of the employee obtaining such legal advice; and it should not pressurise the employee by giving a very short time to think about his/her position. The employee should be given a minimum of 10 calendar days to consider whether they wish to sign up to one of these agreements.
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Author: Gareth Price, Email: