ACAS response to consultation on draft Code of Practice on Settlement Agreements This summer the Government intends to bring in new rules relating to Settlement Agreements, formerly known as
ACAS response to consultation on draft Code of Practice on Settlement Agreements
This summer the Government intends to bring in new rules relating to Settlement Agreements, formerly known as Compromise Agreements. New Section 111A of the Employment Rights Act 1996 (the "ERA") provides that offers to end the employment relationship on agreed terms can be made on a confidential basis and cannot be used as evidence in an unfair dismissal claim to an Employment Tribunal.
ACAS launched its public consultation on the draft Settlement Agreements Code of Practice on 12 February 2013. The Consultation period closed on 9 April 2013 and since then ACAS has been reviewing the formal responses that it received. It has now produced a revised final version of the draft Code of Practice on Settlement Agreements, which will also be brought into effect this summer (the precise date is not yet known). The Code has been renamed "The Code of Practice on Settlement Agreements (under Section 111A of the Employment Rights Act 1996)" and the focus of the Code is the admissibility provisions set out in Section 111A of the ERA, rather than Settlement Agreements generally. The Code is useful in giving guidance to employers about how to deal with pre-termination discussions and in understanding the limitations of Section 111A of the ERA.
The key provisions of the Code:
- explain what Settlement Agreements are and set out what information must be included to make a Settlement Agreement legally valid.
- set out the exceptions to the application of Section 111A. Claims that relate to an automatically unfair reason for dismissal such as whistleblowing, union membership or asserting a statutory right are not covered, neither are claims made on grounds other than unfair dismissal, such as claims of discrimination, harassment, victimisation or other behaviour prohibited by the Equality Act 2010, or claims relating to breach of contract or wrongful dismissal.
- indicate that the confidentiality rules are subject to there being no "improper behaviour" in the negotiating process. Where there is improper behaviour anything said or done in pre-termination negotiations will only be inadmissible as evidence in claims to an Employment Tribunal to the extent that the Tribunal considers that is just.
The Code also sets out a list of examples of improper behaviour (which is not exhaustive):
● All forms of harassment, bullying and intimidation including the use of offensive words of aggressive behaviour;
● Physical assault or threat of physical assault or other criminal behaviour;
● All forms of victimisation;
● Discrimination because of age, sex, race, disability, sexual orientation, religion or belief, transgender, pregnancy, maternity, marriage or civil partnership;
● Putting undue pressure on a party, for example an employer threatening that if a settlement proposal is rejected then the employee will be dismissed.
The Code makes it clear that what is currently regarded as "unambiguous impropriety" in without prejudice discussions would also be regarded as improper behaviour in Settlement Agreement discussions.
Separately, the Code suggests a minimum period of 10 calendar days is offered to employees to consider the proposed terms of a Settlement Agreement and to receive independent advice (unless the parties agree otherwise).
The Code also confirms that if a Settlement Agreement is rejected and the parties still wish to resolve the dispute, other forms of resolution can be pursued. However, the parties cannot rely on the offer of a Settlement Agreement or any discussions about the Settlement Agreement as part of any other process.
ACAS intends to produce non-statutory Guidance on the interaction between Settlement Agreements and other workplace procedures; the tax and National Insurance implications of Settlement Agreements; how Settlement Agreements can be negotiated; examples to illustrate improper behaviour; and template letters. We will update this blog as and when the non-statutory Guidance is published.
This summer the Government intends to bring in new rules relating to Settlement Agreements, formerly known as Compromise Agreements. New Section 111A of the Employment Rights Act 1996 (the "ERA") provides that offers to end the employment relationship on agreed terms can be made on a confidential basis and cannot be used as evidence in an unfair dismissal claim to an Employment Tribunal.
ACAS launched its public consultation on the draft Settlement Agreements Code of Practice on 12 February 2013. The Consultation period closed on 9 April 2013 and since then ACAS has been reviewing the formal responses that it received. It has now produced a revised final version of the draft Code of Practice on Settlement Agreements, which will also be brought into effect this summer (the precise date is not yet known). The Code has been renamed "The Code of Practice on Settlement Agreements (under Section 111A of the Employment Rights Act 1996)" and the focus of the Code is the admissibility provisions set out in Section 111A of the ERA, rather than Settlement Agreements generally. The Code is useful in giving guidance to employers about how to deal with pre-termination discussions and in understanding the limitations of Section 111A of the ERA.
The key provisions of the Code:
- explain what Settlement Agreements are and set out what information must be included to make a Settlement Agreement legally valid.
- set out the exceptions to the application of Section 111A. Claims that relate to an automatically unfair reason for dismissal such as whistleblowing, union membership or asserting a statutory right are not covered, neither are claims made on grounds other than unfair dismissal, such as claims of discrimination, harassment, victimisation or other behaviour prohibited by the Equality Act 2010, or claims relating to breach of contract or wrongful dismissal.
- indicate that the confidentiality rules are subject to there being no "improper behaviour" in the negotiating process. Where there is improper behaviour anything said or done in pre-termination negotiations will only be inadmissible as evidence in claims to an Employment Tribunal to the extent that the Tribunal considers that is just.
The Code also sets out a list of examples of improper behaviour (which is not exhaustive):
● All forms of harassment, bullying and intimidation including the use of offensive words of aggressive behaviour;
● Physical assault or threat of physical assault or other criminal behaviour;
● All forms of victimisation;
● Discrimination because of age, sex, race, disability, sexual orientation, religion or belief, transgender, pregnancy, maternity, marriage or civil partnership;
● Putting undue pressure on a party, for example an employer threatening that if a settlement proposal is rejected then the employee will be dismissed.
The Code makes it clear that what is currently regarded as "unambiguous impropriety" in without prejudice discussions would also be regarded as improper behaviour in Settlement Agreement discussions.
Separately, the Code suggests a minimum period of 10 calendar days is offered to employees to consider the proposed terms of a Settlement Agreement and to receive independent advice (unless the parties agree otherwise).
The Code also confirms that if a Settlement Agreement is rejected and the parties still wish to resolve the dispute, other forms of resolution can be pursued. However, the parties cannot rely on the offer of a Settlement Agreement or any discussions about the Settlement Agreement as part of any other process.
ACAS intends to produce non-statutory Guidance on the interaction between Settlement Agreements and other workplace procedures; the tax and National Insurance implications of Settlement Agreements; how Settlement Agreements can be negotiated; examples to illustrate improper behaviour; and template letters. We will update this blog as and when the non-statutory Guidance is published.