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Neil Andrews Partner Coles Miller

Some news about settlement agreements, plenty of questions remain.14th Jun 2012

by on 14th Jun 2012


Neil AndrewsThe UK Department for Business, Innovation and Skills has released a press briefing on its proposals regarding settlement agreements.

Other than highlighting that what the government appears to be considering - in very general terms - is a re-branding of the already widely used and - in our view well liked - compromise agreement, the release sheds little light on the question of whether the government will introduce the concept of "protected conversations" whereby employers can talk to employees frankly without fear that the contents of these conversations can be used as evidence against them by employees or ex-employees in subsequent Employment Tribunal claims.

The release hints that we'll see a fairly watered down idea of "protected conversations" limited to the making of an offer of a settlement agreement (eg generally money to leave the organisation) being protected, but certainty doesn't give certainty. As regards other mechanics of the proposed settlement agreement we are none the wiser and questions remain:-

What's to be protected and implications?

If the proposal is that employer "protection" is limited to the making of a settlement agreement offer itself, this would change the law slightly. The current position is that where an employer offers an employee a compromise agreement before any dispute has arisen between them, the employee can use this fact as evidence in any subsequent Tribunal claim. How useful that evidence actually is often depends on the context of the compromise agreement offer: in the 2004 Employment Appeal Tribunal case of BHP Paribas -v- Mezzotero, the company offered Ms Mezzotero a compromise agreement instead of hearing her grievance about her treatment after her return from maternity leave and in doing so the EAT held that the company were in effect saying "we've already made up our mind that you are leaving the company" entitling her to resign and claim constructive dismissal. However, as regards the situation where employers offer a compromise agreement after a dispute has arisen (such as allegations against the employee (which are communicated to them) of poor performance or misconduct which could lead to that employee's dismissal), the offer of the compromise agreement and any subsequent discussions forming a genuine attempt to settle a dispute are already protected, subject to certain exceptions for example where the employer's supposed "without prejudice"/"off the record" comments are unambiguously improper or are an attempt to blackmail the employee - in which case they are admissible at Tribunal, so such a proposal now would not move the law on here.

If the proposal is to extend protection beyond the fact and terms of an offer of settlement to include an initial conversation(s) prior to the offer of a settlement agreement this could potentially cause more problems than it attempts to solve. It could for example - unless the legislation was carefully drafted - risk undoing the current law (developed by case law) which, as mentioned above, enables an employee to use an employer's unambiguously improper conduct towards them during supposed "without prejudice" talks as justification for removing the legal privilege otherwise associated with "without prejudice" correspondence. This could allow unscrupulous employers to use a protected conversation as an opportunity to issue "sign this or you're sacked" ultimatums to employees without repercussion.

Settlement of unfair dismissal claims only?

We still don't know the intended scope of the settlement agreement waiver. If it is intended that settlement agreements will only settle unfair dismissal claims rather than all employment related claims including for example discrimination claims under the Equality Act 2010, there's the obvious concern from employers that this type of settlement agreement will - by and large - be pointless since employers want settlement agreement to give them a "clean break" with the employee/ex-employee not to be partial settlements.

Requirement to take independent legal advice?

We also don't know whether there will be a requirement (as there is with compromise agreements) that the employee must seek independent legal advice before signing his or her employment rights away. It would seem very unfair on employees if they were not required to take independent legal advice before signing their rights away particularly if a) the wider protected conversation idea was introduced and b) the model settlement agreement mirrored compromise agreements in facilitating a waiver by the employee of all its anticipated employment related claims, not just unfair dismissal.

Going forward

Later in the summer we are to expect the publication of government consultation documentation on the principles of guidance for using settlement agreements, including draft letters and model templates for employers and employees to use so we'll report back once this is published. Hopefully we'll get answers to some of the questions above.

If you would like to discuss any of the above issues Neil Andrews can be contacted on 01202 338822 and he will be happy to discuss any questions you may have.

This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.