settlement agreements

Many employers, if a relationship with an employee is not going well, for whatever reason, may consider ending that relationship and will hope to start a conversation with an employee to end their employment by mutual agreement (which usually comes with an appropriate sum of money as compensation), rather than pursue a dismissal in other ways.

From 29th July 2013 a change to the Employment Rights Act 1996 will allow these ‘pre-termination negotiations’ to be kept confidential which means they will not be able to be used as evidence in unfair dismissal claims at an Employment Tribunal unless there has been ‘improper behaviour’ (they can be used as evidence in circumstances of a discrimination claim or a breach of contract claim for example). Employees will not be able to use the discussions as evidence, for example, that he or she was constructively dismissed from their job.
We look at what this means in practice and resulting Settlement Agreements here.

Such negotiations can happen whether there is, or is not, an existing employment dispute, or where one or more of the parties is unaware that there is an employment problem. ‘Without Prejudice’ discusssions that existed before pre-termination negotations can only be held where there is an existing dispute between the parties – read more details about Without Prejudice here.

Employees can also propose to their Employer that they start a pre-termination negotiation, although this will be unusual (the Government earlier called these negotiations ‘protected conversations’).

Pre-termination negotiations are defined as “any offer made or discussions held, before the termination of the employment in question, with a view to it being terminated on terms agreed between the employer and the employee”.

This change will allow employers to hold discussions with an Employee about ending their employment and reaching a ‘Settlement Agreement’. Prior to 29th July 2013 Settlement Agreements were called Compromise Agreements.