From 29 July 2013, Compromise Agreements are to be known as Settlement Agreements. This is all part of the Government’s new approach to the termination of employment, to encourage amicable pre-termination discussions and ‘no fuss’ termination payments without recourse to the tribunals. These agreements are used to confirm termination agreements with departing employees.
The Settlement Agreement must be in writing and the employee must seek independent legal advice in order that s/he fully understands the ramifications of such a binding agreement. It effectively means that the employee cannot make a claim in the tribunal subject to important exceptions, e.g. in ‘automatic unfair dismissal’ or any discrimination situations, such as whistle blowers, trade union discrimination or other statutory right.
ACAS have also published a code of practice in relation to these Settlement Agreements, namely that:
- The proposed agreement must be in writing;
- Independent legal advice is an absolute legal requirement;
- A ten day ‘cooling off period’ is desirable, so that parties can consider the agreement;
- An employee should have a third party with them during negotiations e.g. colleague or trade union rep;
- An employer cannot effectively threaten an employee that if s/he rejects the Settlement Agreement their employment would be terminated.
We have been advising upon these Agreements for both employers and employees for many years. If you require advice about a Settlement Agreement contact us using our online enquiry form or call us on 020 7387 2032.
